18th October 2007 : Leadcom voted "AIM International Company of the Year for 2007"




Main Web Site : http://www.leadcom-is.com/

Investor Relations Email : investorsinfo@leadcom-is.com

Big Ted-----yes nice volume, I'd like to think the worst is behind us now, LEAD have brought their 3rd qtr results forward to tomorrow, whether that's to re-assure investors or to get all the bad news out of the way in one hit, we should know by tomorrow. Good luck all.
2517

going into reversal as i type 48.25/48.25 being quoted, have no longer got L2 so difficult to gauge trades...

i would guess, though that is in part because i hold, that if the figures have been brought forward, it is because it is good news, if only to clarify the previous RNS ..... market truism is that good figures are quick to add up and bad ones slow!

Inclined to agree, Rich. Using an execution only broker, i am having to manually raise the stop, but it is heading in one direction only at the mo, tomorrow will tell, but as usual the market appeared to have over-reacted.

I think its all much ado about nothing - in terms of Nokia.

Nokia in CALA represented a lump of revenue, but poor low margin stuff. If, and I hope we hear tomorrow, there is plenty of higher margin work to fill the hole (and you don't need as much high margin to fill a bigger lump of discarded low margin) then the brokers and media have been very wrong to start all the notes of panic they have been spouting.

Fingers crossed...toes as well ;) LOL

down it goes again.........might start shorting this

Outlook for this company is good, turnover set to increase, margins set to increase, bad news all out in the open. This stock will be back at 60p level in six to 9 months so I wouldn't short it, 40-50% upside from here.

As african market comes alive there will be more and more business in the pipeline, in addition to that in India and other developing economies.

Personally see this as a buying opportunity, kicking myself for not part closing my deal of thursday which was at 25% profit in two days, bird in the hand. Still if I had it would have gone up!!!

Could make out a case either way. Management should be commended for focussing on profit rather than revenue and growth elsewhere looks promising. Statement that "At this point, co-operation with this vendor in other regions will continue as planned, provided healthy margins are maintained" makes me uneasy. Will sit on the fence for the time being.

Partridge------- "At this point, co-operation with this vendor in other regions will continue as planned, provided healthy margins are maintained" I feel the opposite, at least it proves that LEAD will not do business at any cost, I imagine the vendors try and squeeze margins as much as they dare, similar to the supermarkets and their suppliers.
2517

Not wishing to appear to be clutching at straws but, would someone like Spirent be interested in LEAD.
2517

Pretty much as expected, and the move to working more closely with operators and less with vendors is good to see.

Debtors days have been reduced (on a comparitive basis), but have risen with the merging of the Ytel accounts into Leadcom, however they clearly state they will pull the ex-Ytel figures into line.

The expectation stated by Arik of finishing the year with 9.5% to 9.7% NOP (which currently stands for 9 months at 7.6%) means Q4 is going to have a significant positive weighting on the yearly figures.

Ericsson, Nokia, Alcatel and many others are squeezing margins, but so are operators and this is where the move by Leadcom to start competing with Ericsson, Nokia and Alcatel etc makes sense. Operators will be squeezing the vendors, and so if Leadcom can do the work for the vendors and make money, then they can do the work direct for the operators, at higher margin and the operator also gets better margins than taking on Nokia etc... so its a win/win for operator and supplier - but yes it will likely mean, if the trend spreads, that the installation side of the business for Ericsson, Nokia etc.. is going to post more woes in the future.

Working direct with operators also leads to more business on the support and service side.

The expansion into AP has led to lower operating margins as well, we have known this for some time, the company has clearly stated as such ahead of it happening, one can only assume that the India work was done mostly in Q3, and if Q4 is to weight full year NOP back up to 9.5%+ then its likely the Q4 work is of much higher margin.

A bit of a kitchen sink job this, as I have suggested in might be earlier. When you discount the geographical side (as in mostly India work in Q3 ?), and the CALA issues and look forward - there is plenty to be hopeful about.

I must admit to not realising how much the initial, if you like "promotional", work in India would be discounted. Although I always draw attention to how much promotional and marketing expenses effect profits, I overlooked that slightly here. When you try to break into new markets, you have to offer your services cheaper than the established, and once you become proven at what you can do, you can go about building margins up. India appear to be, to me, quite considerably lower margin in those initial contracts to get the Leadcom name known and proven - and now we can move on.

Anyway the overriding story is "its a one off quarter of bad news".

Pretty much as expected therefore since the RNS, and we have a kitchen sink job quarter, and CALA becomes discontinued and accounts are restated as such.

Q4 will be a good one, and raise NOP for the full year up to 9.5%+ levels is what is said - so there is something nicer to look forward to.

Will be listening to the webcast later with great interest.

2517.... Fair point and as a general principle I very much subscribe to the "sales are vanity, profits are sanity" school. What it does not say is how much of remaining sales are to the same customer. If relatively small, then no problem. I do not know the industry well enough to understand LEAD competitors and whether the historically healthy margins they have made elsewhere can be maintained.

After review I would suggest figures like this now (with 2007 being a kitchen sink job).


2007

Turnover $206 mill
Normalised operating profit 9.5% gives $19.57 mill
Exceptional $12 mil (3m+6m+spare 3m)
Tax of 31% of $7.57 mill
Net profit $5.22 mill
120 mill shares in issue

Exchange rate $2.08 to £1
EPS 4.35 Cents = 2.1p


2008

Turnover $320 mill
Normalised operating profit 10% gives $32 mill
Exceptional $4m
Tax of 29% of $28 mill
Net profit $19.88 mill
125 mill shares in issue (+5m over 2007 for safety)

Exchange rate $1.95 to 1
EPS 15.9 Cents = 8.15p

Hows that short coming along scotinvestor?

have reluctantly decided that, especially in the current climate, LEAD is going nowhere good in the near future so have cut my losses (caused by greed in the first place)

Probably will be a change of major shares ownership in the months ahead, then get what will be awful prelims out of the way - and then quickly move on to Q1 08 results.

If your on margin cynic, then getting out might be a wise choice. I am happy to hold through all of this, mid term things should be very positive, after short term wobbles subside.

i only deal in CFDs but was not under any pressure ..... just don't feel this stock is the place to be at the moment ..... in fact, am generally and gently reducing exposure in the markets as i feel there is an awful lot of nastiness to come

I posted my thoughts on 2007 and 2008 earnings earlier, and its copied below too. I am hoping now - given that nobody really cares anymore about 2007 results, that we get a good "kitchen sink" job at prelims, everything is written down or off and we move forward cleaner than clean into 2008, a year of outperformance.

The insti's buying in now know they will get a divi, so they will not care about this crappy 2007 year, they will be focussing on 2008 onwards, which so am I now.

Leadcom will likely get sleepy now until Q1 2008 results are out (hopefully the prelims will be awful in terms of exceptionals and we limit EPS to under 2.5p).

My estimates :

2007

Turnover $206 mill
Normalised operating profit 9.5% gives $19.57 mill
Exceptional $12 mil (3m+6m+spare 3m)
Tax of 31% of $7.57 mill
Net profit $5.22 mill
120 mill shares in issue

Exchange rate $2.08 to £1
EPS 4.35 Cents = 2.1p


2008

Turnover $320 mill
Normalised operating profit 10% gives $32 mill
Exceptional $4m
Tax of 29% of $28 mill
Net profit $19.88 mill
125 mill shares in issue (+5m over 2007 for safety)

Exchange rate $1.95 to 1
EPS 15.9 Cents = 8.15p

share similar view to Richard, and have sold @45p this am, now out, dont see any immediate rush to hold...

I've stayed in, just in profit, won't buy anymore as there are opportunities appearing in my favoured value area. At these lower levels any news of contract wins could move the LEAD sp up, I suspect there's more good news to come than bad. Says he with his fingers crossed.
2517