Shares digital

An encouraging year end trading update from voice and data software specialist AT Communications (ATCG:AIM) saw its chief executive, Alex Tupman, and finance director Ian Crawley, combine to spend £178,000 on 500,000 shares.

The company’s profits in the second half soared to £3.9 million compared with the £2.3 million chalked up in the first six months, while just as important, net debt was slashed by £3.1 million despite exceptional cash costs. House broker Cenkos believes there is a strong chance that the market will re-rate the shares going forward, with analysts there predicting that net debt could fall by another £4 million this year. The group was able to refinance its borrowings on significantly improved terms.

During the second half the group won a multimillion pound contract with BT (BT.A) as well as significant contracts with HMV (HMV), DSG International’s (DSGI) Dixons chain, plus Relate. These deals have encouraged the broker to forecast turnover growth of 14% this year. Cenkos expects profits to jump by roughly a quarter to £7.8 million, with EPS expected to rise to 7.1p, indicating a PE of less than five, based on the current shares price of 34p. Publication of the full year figures in March may well act as the catalyst for any share price re-rating.

Shares says: Continued enthusiasm of directors for the shares makes a re-rating likely.