Tues 31 July 2012 - Morning report

Good morning! Today's report focuses on my largest position (which I have held since about 2002!) which is high-end digital CCTV maker, IndigoVision (IND).

It's all systems go at Indigo, with the following highlights for this £24 mkt cap;

• Turnover £30m+ (up 5% vs last year)
• Margins also up
• Costs "well controlled"
• Operating profits expected to more than double to at least £2.6m

Now admittedly they had a poor year last year, but even so it certainly looks like the FD-turned new CEO, Marcus Kneen, is pushing things forwards.

Their year-end (31 July) trading statement usually comes out on 10 August, but is early this year - a sign of good financial reporting systems, so that's a positive.

Bear in mind also that IND has probably the strongest (relative to its size) balance sheet I can remember seeing, with no debt, last reported net cash of £7.4m and net current assets of £13.5m (and no material long term creditors).

I could certainly see this RNS opening the way for IND shares to move up from 300p to 400p in due course. Now if they get some really strong growth going, then the sky's the limit, as the excitement with IND has always been its operational gearing - 60% gross margins on a fixed cost base provides potentially explosive upside!

The company has had big disruptions in the last year, with the founder trying to take it private on the cheap, then he was forced out by the Chairman in an astonishing Board Room coup (given that the founder still owns 23% of the company that was quite a coup), then the founder came back with a PE backer with a mooted 400p bid, which was rebuffed.

The long-serving former FD became CEO, and whilst he may not be the obvious choice for that role, he certainly seems much more highly motivated are focused than his predecessor.

So once again, everything to play for at IND, could be exciting times ahead, who knows?

That doesn't really leave me any time for other companies, but I'll try to squeeze in a couple more.

Allocate Software (ALL) look pretty solid - organic revenue up 10% and total including acquisitions up 22%. Diluted EPS rose 16% to 7.4p for y/e 31 May 2012. So a PER of 10, at 75p a share, which looks good value to me. Has net cash of £4.3m too. They do seem to capitalise some costs though, so check out intangibles. But looks worthy of further research, so I'm highlighting this one in yellow.

Supplementary report to follow, want to get this published before 8am.