Gladstone is a company which has recently become cash generative and is experiencing a turnaround in its buisness. Following a board change the group has turned the corner in securing future profitablility and is on track to report profit ahead of expectations within the next few months. Currently valued just over 5mil this stock is need of a re-rating and seems to have been exempt from the recent rallys.

Excerpts from Full year:

"Gladstone has made a full year profit after tax for the first time of 184k (last year loss 1,676k).

- Earnings per share before goodwill and exceptional items has risen to 1.53p (last year loss 1.50p).

- The quality of earnings has improved. Software support contracts and rentals now represent 37% of turnover (last year 31%).

- Ongoing investment in our core product MRM.plus2 continues to position us ahead of our competition."

"Our MRM trading division is performing in line with management expectations. We raised 260k by an equity placing in September 2003 and will continue to use
this cost efficient route to raise funds for expansion when appropriate. We are
continually looking for the right international opportunities and are exploring
the use of overseas distributors. Holmes Place, one of our private sector
clients, recently decided to upgrade to our central database solution and will
be using our software across 5 European countries. We have good reason to be
optimistic about the future."


Chart:




Full year:

http://moneyam.uk-wire.com/cgi-bin/articles/200312231436156124T.html

As long as the buys keep coming I dont think the wildlife will bite!!!!

Looking forward to the results and perhaps then we will discover why the directors invested 100k of thier own money in the company - must be good news

i got my dividends today so whats on the cards????????????????/

er, i don't think there dividends - i would buy a pint & some fish & chips, then forget about them.

Interesting to see a small Life Fund appears to have accumulated a notifiable stake. Bit surprised it is a qualifying investment, but nevertheless quietly reassuring - maybe the beasts will get a meal out of this one soon!

paddington bear, i think you are right ????????????LOL

The following post was made on iii and is an excellent effort - well worth the read.


I have read some of the past posts on this board with interest – it appears that many of the contributors to the conversation have emotional hang ups about the past. I am new to this company, and believe that history is dragging down the share price creating an exception buying opportunity – when compared to the sector averages.

Why? Well all the clues are in the annual accounts and in the last six months RNS releases. The salient points being:

Chairman’s statement Dec 2003
1 “I believe the market undervalues us” – very rare for this to be allowed by advisers! As these sort of statements can cause all sorts of problems if future listing particulars are required – therefore they are not often said.
2 “losses dramatically reversed into a more PREDICTABLE level of profitability”

CEO report
3 Results show “twice the combined results of Membertrack and Microcache before they were acquired” – i.e. in spite of the troubled past the underlying business has grown.
4 “best product in the market”
5 “competitors have struggled to emulate” [our technology]
6 customers are taking company into new markets – Holmes Place in 5 European countries. To have your customers take you to new markets is by far the lowest risk method of expanding your business – trust me I have been trying it for years.
7 Low broadband costs will allow greater service to members – low broadband is here already.
8 Most salient comment from the CEO – we have “Reasons to be optimistic to the future”

All the above comments are real positive buy signs – that auditors and advisers have been happy to agree with.

Looking at the financials….

Reported a PBT in 2003 of 183K on T/o of 7.9m. Okay T/0 fell a little but profits returned. The real upside is hidden in the detail of the prelim results.

Of the 5.6m of admin expenses 400K related to depreciation of the R & D bill. The R & D is now fully depreciated and so this cost will not occur again and will fall straight to the bottom line.

The company is now at a net nil cash position and so the net 60K interest charge will fall away

The directors are confident that the products are market leading and will grow in the future – lets say the gross profit grows by say 5% (which is hardly market leading) this will add 300K to profits as long as costs remain under tight control.

So what will the profits grow to?

PBT 2003 183K
R & D finish 400K
Interest 60K
Business growth 300K
Total 943K

I would suspect that given the past trading there will be significant tax losses available for the near future and so the PBT will be reatained by the company.

Therefore the business is trading on 6 x full PBT – the sector average is 12 to 15 times. This suggests that there is an upward correction to come and the fundamentals suggest a 27p share price as a minimum – sector leading products normally demand a premium – so 30 – 35p looks possible.

Looking at cash flow – the goodwill will be added back and assuming a constant level of working capital (not unreasonable given the low assumption in profit growth) free cash flow will be 1.38m against a market cap of 6m. I doubt there is any other market leading growth tech company that can boast this sort of ratio of cash flow to market value.

Other buy signs – of the 6m market cap 1.5m is underpinned in freehold property – giving an economic value of 4.5m.

The chairman and CEO have bought shares recently – these sorts of guys only take one-way bets! I would if I had their knowledge.

The final point – why are the results being published in such a hurry – if it was bad news they would have had to send out information in a hurry (24/48hrs). Normally interim prelim statements are made after two months not two weeks – the only reason to get them out in a hurry is if they are so good or if there is a buyout or offer on the table! I would try to buy it out at this price – the cash flow alone would pay off any debt in two/three years – think about it!

Of course DYOR, but don’t let the past cloud your thinking – the past cannot be undone.

Hunt for Value

Very good interims today adds credence to the "good figures take less time to add up than bad" theory mentioned by myofbic. Quietly positioning itself for growth phase (shareholder register reduced by 75%, strengthened balance sheet/cash). Just hope they don't spread themselves too thinly in overseas markets and concentrate on maintaining/developing existing UK customer base, in particular burgeoning Local Authority market. DYOR

Just noticed good results with very positive growth expected.. I think as news filters around they will reach much higher levels as longer term they still seem very undervalued.

I have just added a few to those I hold.

I have reviewed my investment in this as it seems it has no following and very little volume of late.

What is wrong with this.. I have not yet sold but thinking of doing so very soon.

Any views?

Whats wrong with it? Two words, one beings with B the other begins with M.

Bizpack stick with the facts & figures & you'll be alright.

GLD is in expansion mode now having opened an office in Dublin, bought new larger premises in Glasgow & will be opening a new office in Sydney in September.
They have also issued an upbeat trading statement as well as a batch of contracts & plenty of news on their website listed below - all looks very rosey & the company is massively undervalued.

http://www.gladstonemrm.com/gladstoneinternet/default.aspx

http://www.gladstonemrm.com/gladstoneinternet/default.aspxhttp://www.gladstonemrm.com/gladstoneinternet/default.aspx

Nice chart breakout underway with higher lows and higher highs since February. Two closes above 16.5p and there is an enormous gap above, into which we would head. Going up at a time when technology shares in general have been struggling. A good sign.

Sudden 10% rise this morning to 16.75p. Looks promising. Anyone know why - any thoughts Hawick?

Tipped in the IC today - also good report in Moneywise & Broker reiterates 2.19p EPS giving P/E of 7.5 at current levels - cheap.

Great - thanks Orion. I'll take a look at IC

Lucky I held onto to mine...Lets hope next week will take them well over 20p.

i understand the brokers say true value is about 22p