Small Cap Value Report (Thu 27 Apr 2017) - SVCA, RIC, AIR, STY, SNX, HVN, CCT, IMO

27th Apr '17 by Paul Scott

20 comments 17953 reads

Good morning! It's Paul here. I'll be doing today's report.

In the meantime, I covered loads more companies in yesterday's report, in the evening. I appreciate this isn't ideal for readers, but sometimes there's just so much going on during market hours that I can't concentrate properly on report writing.

So yesterday's report had a big section on Crawshaws (I quite like the deal with 2 Sisters, and have bought some stock personally). Other companies covered are results & trading updates from: Proactis, WANDisco, RedstoneConnect, HML Holdings, Reach4Entertainment, and Dillistone.

Today, I hope to cover;

Servoca (LON:SVCA) - trading update

Richoux (LON:RIC) - poor results & impending fundraising

Styles and Wood (LON:STY) - final results

Synectics (LON:SNX) - AGM statement

Harvey Nash (LON:HVN) - Preliminary results

Character (LON:CCT) - Interim results

IMImobile (LON:IMO) - trading update

So that will keep me busy for the rest of the day.

Servoca (LON:SVCA)

Share price: 27.25p (up 23.9% today)
No. shares: 123.7m
Market cap: £33.7m

Trading update - this staffing company has a year end of 30 Sep 2017, so it's reporting on H1 performance today.

Things seem to be going well;

We are pleased to report that following a positive start to the year, results for the first six months are ahead of internal expectations and significantly ahead of the corresponding period last year.

Outlook comments for H2 also sound positive;

The Group's diversified business mix has delivered a resilient performance and this gives the Board confidence as we enter the second half.

Valuation - it's the usual struggle to find broker research, but there's a FinnCap note on Research Tree from Dec 2016, which forecasts 2.4p adjusted EPS for this year. The Stockopedia consensus figure is in a similar ballpark, at 2.36p.

FinnCap said this morning that they're leaving forecasts unchanged. That's surprising, as the RNS suggests the company is out-performing. So personally I'd be inclined to base my valuation on maybe 2.5p or 2.6p EPS for this year?

That means, even after a big rise today, the valuation is probably just over 10 times this year's forecast earnings. That's probably about right - small…

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Howard Adams

27th Apr '17

Hi Paul

Any chance you might look at the comprehensive results report presented today, for Air Partner (LON:AIR) ? (I hold).

I'm not entirely sure why the share price dropped as it has as I think the explanations of activities all seem sensible and with a good strategic direction. I added on the dip.

Regards
Howard

Brilliant Leader

I would also be interested in your thoughts on Air Partner (LON:AIR) results Paul, although I am cognisant that you have a fairly ambitious list already.

nickwild

Yes please cover Air Partner if you have time.

Nick

Paul Scott

OK, you've twisted my arm! I'll do a section on Air Partner next.

Regards, Paul.

goingbroke

I fourth air partner!

FREng

It's disappointing that the results RNSs for Air Partner (LON:AIR) are missing from the StockReport at 3pm today, when they have been out since 7am and show up fully if you follow the link to the latest trading statement and scroll to the bottom.

Access to the latest news is critical before the market opens, so why can't Stockopedia deliver it promptly so that we don't have to look on other websites?

Rusty2

Yes have noticed some results are missing recently Proactis Holdings (LON:PHD) was the same yesterday.

Thanks for covering Air Partner (LON:AIR) Paul

Paul

Many thanks for doing Air Partner (LON:AIR) . I welcome your useful cautionary points.

Regards
Howard

daveinthelakes

Paul,
I hold Character (LON:CCT) and bought more when the market opened. The lower figures were flagged by the company sometime ago caused by sterling and has been addressed by renegotiating/resourcing product hence they will be back on track by year end.
I knew with the share price drop that they would be back in the market and they released an RNS at 4:33pm advising that two directors had bought more shares and the company had purchased 0.33% of the outstanding for cancellation.
Notwithstanding share awards they have, using cash, reduced the share count by 17.5% in the last 6 years.
Dave

GrahamF

Thanks for reviewing Character (LON:CCT) Paul. I've had a long position in this one since May last year when my decision to buy was at least partly based on a glowing Stockrank as shown here

Since then its made no progress and is now on a downwards trajectory and close to the point at which I would normally exit.

However, the interims do say....

"Proposed dividend of 9.0p up 28.6% on comparative period"

"The second half has started in line with budget and the Board remains of the view that the Group is on target to achieve current market expectations for the full financial year to 31 August 2017"

Both those statements would seem to be very positive and so it may be worth hanging on. But the board may well be in denial here considering the poor revenue and EBITDA performance.

"Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) were £8.5m, down 18.3% on the comparative period (2016: £10.4m)"

So, I am undecided in which case I think I'll have to let the rules I'm trying to set myself for when to sell take the decision for me. (As you said before - it's hard deciding when to sell!)

Hi Dave

I take your point about Character (LON:CCT) profits being impacted by the exchange rate and that they are hopefully managing to mitigate that.

My worry is also that the revenue is down 5.7% (They are not clear whether that is in constant currency or not). They use the old chestnut about the comparison period being a strong period without saying why the growth has not been maintained or what the special factors were that meant that sales shouldn't be expected to grow. I am worrying unnecessarily?

David Talbot

Paul

I really appreciate you responding to requests and reviewing Air Partner. Thank you.

ridavies

Congratulations on covering so many companies. May I add one more for your expert considertaion. I must admit that Caretech Holdings (LON:CTH) is one of my favourites. It operates in a field - specialised care -which many of us would like to forget existed. It is highly professional with its own wing which covers training to nationally accepted standards which it can also offer to other carer companies. It faces up to local authorities with confidence in negotiations on rates because they know it does the job at a cost they could even begin to match. It treats its investors with respect, and is growing through trading up its own stock and through selected acquisitions. It is clever in raising funds for the latter - last year was a ground rent deal; this year otn was a placing and the fund for growth has been extended by delaying repayments to 2019. It is not glamourous by many standards, but within its field it is an icon, a role model of professionalism. However, all that is qor6ds. I qwould be grateful if you would cast your profeassional eyes over the figures. You would be doing a service to me and many others who are either shareholders or could eaasily become ones in the near future. Thank you.

Re my Caretech Holdings (LON:CTH), please accept my apologies for the typos. Must do better!

Hi Graham,
I think you have to look beyond the figures when assessing companies. Character never do any PR, they maintain a low profile to enable share buybacks at cheap prices. The history is there- 17.5% share reduction using cash flow. Beware of companies borrowing to do buybacks.

You think they are under performing yet the company and two directors buy? This is their modus, to make the company unappealing to the market.

Character have some of the best toy license's and I believe are a defensive play because no matter the economic conditions, family always buy toys for kids. My only other play in this sector has been Hasbro, a 100%+ return inside two years.

Character were always going to have a problem with a 15% reduction in the £/$ exchange rate as nearly all their inputs are in dollars. Not just product but also licensing fees.

I have no doubt about the medium term outlook for Character,

Good Luck, Dave

Maddox

Hi Paul,

IMImobile (IMO): You will recall that the shareholder structure of this Company was very poorly presented being complicated by founder shares - this meant having to do a lot of maths to get to a fully diluted set of metrics. Anyway, I'm not sure whether you've spotted that (thankfully) they have resolved this annoying complication of the founder shares back in January. This makes the Company far more transparent to analysis and thus the good performance more visible and comparable. IMHO this will encourage investor support and a re-rating.

Regards, Maddox

aflash

28th Apr '17

Suggestion to Paul and Graham: Remove the daily deadline.

There have been a number of posts complaining about not receiving the report 'on time,' mainly from newbies or non-subscribers. They have no idea the difference a consistent review of a share over a period of time can make to one's wealth. Most subscribers will agree it is well worth waiting for these reports and well worth using them as a starting point or for periodic review only.
I agree with FREng and Herbie47 that it is preferrable computers be updated quickly but not the human reaction. Sure it is all time sensitive but anyone on the ball will have already researched the share and act one way or another merely on the price action of the day. Confirmation will come within the next twelve hours that you have made a good or unwise move.

Effortless Cool

Paul,

Regarding your comments on Richoux ....

"The figures published today are audited (which takes time to do). However, I think we need more consistency in how companies report. Some companies put out preliminary results, on a faster timetable (which is best practice). Whilst others, such as this one, have a yawning gap whilst they prepare the figures & get them audited. A tiny company like this has very simple accounts, it should be a doddle to prepare them, if the finance department is well-organised".

.... you may be interested to know that the FRC has just launched a consultation on the role of auditors in preliminary statements:

https://www.frc.org.uk/Our-Work/Publications/Audit-and-Assurance-Team/Discussion-Paper-Invitation-to-comment-Auditors-File.pdf

pineapplefritter07

10th May '17

Paul Bell an Isle of Man businessman allegedly owns approx. 35% of Styles and Wood shares RNS27391, and I wonder if his implication in Money Laundering (see Isle of Man Examiner 9.5.17 re POCA confiscation) will have an impact on the share price or the Company. I might be wrong so please check but thought this information should be shared and please do comment. Thanks

Small Cap Value Report (Thu 27 Apr 2017) - SVCA, RIC, AIR, STY, SNX, HVN, CCT, IMO

Servoca (LON:SVCA)

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Paul Scott

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