Leadcom - an absolute cracker!

www.armshare.com bullish on Lead...

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The interim results to June 2006 showed sales of $61.8 million (2005: $46.8 million), pre-tax profit of $5.7 million (2005: $4.3 million) and EPS of 4.0c (2005: 5.0c) - the tax rate was 30% (2005: 7.1%). The company reported that the gross margin was 28.5% (2005: 27.6%); the board expects 2006 to show 40% growth over 2005.

A September update reported contract wins via vendor partners in Brazil, Venezuela and the Caribbean with a total value of over $10 million, part of which will be recognised in 2006, with the majority adding to Leadcom's already significant order book for 2007.

The October update re Q3 to September 2006 reported that sales for the quarter were c$35 million (2005: $24 million) and for the 9 months were $97 million (2005: $71 million); the adjusted profit margin for the quarter is expected to improve slightly over the margin of 10.6% recorded in H1 2006; the totals of the order book and frame agreements have grown during the quarter, and the order pipeline has increased significantly - most of the revenues from the order book and frame agreements will be recognized in 2007; the board anticipates meeting market expectations for the full year, and believes that a solid foundation is being built for a continuation into 2007 of the growth trends experienced to date.

The December update re the final results to December 2006 reported that they are expected to show sales in the range of $137 million to $140 million (2005: $97 million) and adjusted pre-tax profit in the range of $14.5 million to $15.0 million (2005: $9 million). With orders and frame agreements for 2007 currently exceeding $100 million, sales in 2007 are expected to be at least $180 million.

A later December update reported that a project in India has been awarded with a first phase value of c.$10 million, which will be recognised in 2007.
Research Standing
We said "Analyis is more easily practiced on operators nearer home." Despite this Little Englander stance, this company's performance commands attention.

The company broker's note dated 1st December projects EPS of 3.9p for 2006 (based on 30% tax charge vs 17% for 2005) and 5.2p for 2007 representing P/Es of 13.7 and 10.2 respectively based on the share price of 53.25p at 15th December. "