Small Cap Value Report (31 Mar 2016) - SOM, SDY

Good afternoon,

Am running a bit late today, so I'll update this report throughout the afternoon, so please refresh this page later.

Somero Enterprises Inc (LON:SOM)

(at the time of writing, I hold a long position in this share)

Another day, another transcript. I was burning the midnight oil last night editing a transcript from my interview with the CEO & CFO of SOM back in Jan 2016. Reading back through the transcript, there's loads of useful info in there about the company - here it is.

They gave smashing, direct answers to my questions too - I get the feeling this is a very open management team, with nothing to hide.

There's been a bit of Director buying announced today (40k shares at 151p in total) from the CFO, and a NED. The chart looks poised to attempt a breakout, so it could get quite interesting. I like those points as confirmation, but it's the fundamentals that matter most to me, obviously. Note that SOM has a StockRank of 99, so all our ducks are lined up in a row!

The CEO sold £3.8m of stock, in 2 tranches, in 2014 and 2016, but given that he's already past retirement age, that looks to me like an orderly winding down of his position, in advance of retirement, which is fine.

As always, remember that SOM is highly cyclical, so when the next big US recession looms, we need to run for the hills without delay.

Spaceandpeople (LON:SAL)

(at the time of writing, I hold a long position in this share)

I thought the CEO & CFO here came across well in yesterday's webinar organised by ED. Management sounded upbeat about their various new projects. So I hope to see some out-performance here against cautiously-set forecasts.

The CEO has agreed to let me interview him on Monday morning, so as usual I am soliciting questions from you, here is the usual form to submit your (concise please!) question for me to ask SAL.

The good thing about doing interviews in this way, is that there's no judgement required on my part in terms of how probing to be. Since the questions actually come from you, I can ask pretty much anything! Although I reserve the right to tone down aggressive or abusive questions, or to not ask flippant or irrelevant questions. Generally though, I ask nearly all of the questions submitted.

Especially noteworthy was my mammoth interview with Trakm8 Holdings (LON:TRAK) where I asked 47 reader questions! The company's responses pretty much blew apart all but one of the bear arguments, contained in an ill-judged shorting attack on the company in Jan 2016.

Shorters are usually correct, but they do sometimes get things completely wrong, when they jump to incorrect conclusions, and whip each other into a lather, seeing things lurking in the shadows that are simply not there. Although usually most shorting attacks are well deserved, this one was not. Anyway, the numbers will do the talking when the next results come out.

So my interviews are certainly not soft interviews, or PR-driven things. The questions come from investors, and are asked by an investor. I don't charge a fee now either, as I think that can (even subconsciously) compromise my independence. It's a bit galling turning away fees, but integrity matters more than money.

Right, on to today's news.

Speedy Hire (LON:SDY)

Share price: 37.75p (down 1.3% today)
No. shares: 523.3m
Market cap: £197.5m

(at the time of writing, I hold a long position in this share)

Trading update - for the year ending today, 31 Mar 2016. Looks reassuring to me;

The Board confirms that the full year adjusted profit before tax is anticipated to be in line with market expectations and net debt broadly in line with the previous year end.

Following a review of the carrying value of intangible assets, the Board has concluded that the value of acquired goodwill held on the Balance Sheet (c.£45m) will be written off as a non-cash Exceptional Item in the full year results.

Writing off goodwill doesn't matter - it's just a book entry, and has no cash impact. The whole method of accounting for acquisitions is ridiculous really. So personally I write off all goodwill for every company I look at, as a matter of course.

My opinion - this is a turnaround situation, as management seem to have botched up the basics of running the company in 2015.

The good news is that it has a solid balance sheet, so there are no solvency issues. I think it's just a matter of waiting for performance to improve, then the shares should recover. They've seemingly bottomed out over the last 6 months, so I am hopeful of better things to come, providing they don't manage to screw things up again.