I rate this little software company on a current PE of 5-ish. Cash covers 40% of market cap and it is priced below net liquid assets.

Aim listed as VI Group. Epic = VIG

http://www.vero-software.com
http://www.veroint.com (US site)

Current market cap at mid-price of 8.5p and 37.5M shares in issue = 3.2M

The company develop and market CADCAM software for the mold and die sector. Its really the little brother
of Planit (PLN) and Delcam(DLC)

The interims to end June show strong jump in pre-tax profit (before goodwill) to 0.44M (versus 0.16M)
http://www.companyannouncements.net/cgi-bin/articles/200509080700079755Q.html

EBITDA has risen from 0.3M to 0.56M for the 6 month period. Strong cash flow.

Although headline numbers are depressed due to goodwill write-off Im basing my PE of 5 estimate on doubling H1 pre-tax (pre-goodwill) profit and then applying a 30% tax charge.
That gives 0.6M after tax. I think this is reasonable and cost-savings in H2 should also help;

Cost-saving measures introduced during the first half of the year will start to show through to the bottom line in the
second half and will partly be used to fund an increased level of Research and Development expenditure

There was a bizarrely high 90% tax charge at the interim stage. However looking at last years results this should reduce to
something normal at year end.

Balance sheet at end of June:

Cash = 1.4M
Net current assets = 3.5M
NTAV = 3.3M
NAV = 4.3M

So strong balance sheet offers a degree of downside protection if trading goes tits-up.

Last year revenues were 9.7M (versus 8.8M)and pre-tax profit (before goodwill) was 0.26M (versus loss of 0.75M).
There was a headline loss due to goodwill write-off.

The latest set of accounts can be viewed here;
http://www.vero-software.com/vi_group2004.pdf

Recent acquisition after half year end of Smirtware, a small US-based 3D company for 0.6M with the payment
being spread over 3 years.
http://www.companyannouncements.net/cgi-bin/articles/200508240837434253Q.html
http://www.smirtware.com

SMIRTware have an impressive client list and made a profit before tax of 44 grand on a turnover of 460 grand.
So I guess they paid an effective PE of 20 if you knock 30% of the operating profit. VIG expect their distribution/reseller network
to aid growth in Smirtware's revenues/profits

Cash versus market cap is high at 40% and as long as cash generation continues as it has the last year or so then the Smirtware acquisition shouldnt reduce the level of cash (0.6M to be paid over 3 years).

Theres an unrecognised deferred tax asset of 0.45M due to previous trading losses.

Optimistic outlook.

By broadening our sales network in Europe, the US, China and the Far East, and
by continuing to invest in new product development, we believe VI Group is on a
much stronger footing to secure a larger share of the specialised mould and die
market. We look forward with optimism to the rest of the year and beyond

Management hold about 15%


Negatives;

Illiquid and tightly held. There are a lot of +3% shareholdings. VCTs own around 40% of the share capital

Headline numbers hit by goodwill write-off

Generally a large spread although you can sometimes trade well inside.
IMO this is a stock suited to private investors who are happy to make a modest investment and hold for a year or so hoping for a +50% gain. If you have a 100 grand to invest then forget it. You'll put 50% on to the share price.

Unclear how much degree of profitability is dependent on larger irregular contract wins.
For instance a contract win in Japan just over a year ago is worth at least 1.4M in payments over 3 years.
http://www.companyannouncements.net/cgi-bin/articles/200410080700018268D.html

There is a high level of debtors although Don Babbs, the chairman, has previously stated that this is due to their considerable sales in Italy where "...the business culture is such that even selling a paperclip gets 90 days credit..."

It should be noted that the Company in it's recent AGM statement of 13 June stated that it was on course to meet it's Broker forecasts.I see the share price is edging up now the weak holders have been taken out

regards

Soon to be new name on the block. Not before time as it has been misleading, VI Group to change name. A resolution will be proposed as a special resolution at an Extraordinary General Meeting to be held on 31 August 2007 for the VI Group plc (AIM:VIG) to change its name to Vero Software plc (AIM:VERO). Club members at shareclubuk.co.uk have been anticipating this for some time.

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