Small Cap Value Report (27 Sep) - HHR

Good morning! Fridays are normally quiet for company results, but not today - there are lots to look through. The first one I'm checking out is Helphire (LON:HHR). Regulars will know that this is a favourite of mine, having bought in at 3.5p and explained why here on 20 Jun 2013.

Helphire management pulled off a remarkable turnaround, somehow persuading the Bank to write off a large chunk of the bank debt, plus they have drastically reduced debtor days, and pretty much fixed all the other legacy issues (e.g. surplus properties), and even resumed dividends. I was expecting about £7.5m underlying profit, but they have delivered £8.0m, so these results are good.

With 1.561m shares in issue by the year end, following a Placing, you need to be careful when looking at EPS, because that has been calculated using a weighted average number of shares of 653.8m for basic EPS, and 780.1m for diluted. So you cannot just take the 1.25p basic EPS and say that it's on a PER of 4.5, at 5.6p per share, since that would give a misleading result for the future, given the larger number of shares now in issue.

I cannot find any broker forecasts for the current year, so it's not the easiest share to value at the moment. However, the way I look at it, is that in a turnaround year they made an underlying profit of £8.0m, so there should be upside on that figure going forwards. Also, it is now completely debt-free, including vehicle finance, and paying dividends again, so taking that all into account the market cap of £87m at 5.6p per share doesn't look expensive to me.

Debtor days are at a record low of 126 days, since Helphire now work collaboratively with insurance companies. Indeed I note that their largest shareholder is Aviva. Another dividend has been declared, for 0.11p which goes ex-divi on 9 Oct 2013. The strength of the Bal Sheet is now such that I would expect another special dividend in due course.

There is further upside from the eventual settlement of the Autofocus dispute, where insurers relied on false data on hire pricing rates, and are now liable to pay compensation to companies such as HelpHire. I am not sure of the likely amount there, but it's just icing on the cake, and some of the figures being talked about are pretty substantial. So all in all, it looks like a solid hold to me, although I am keen to see some up-to-date broker research, if anyone has any.

 

I see that the market is not really sure how to react to the Helphire figures, and after initially being up, the shares are now down 11% to just over 5p. I think that is a pretty good entry price actually - perhaps some investors have been spooked by all the exceptionals (none of which were new though, all previously disclosed), or the outlook statement? 

 

 

 

I've tried to look through some more results, but in all honesty just cannot get my head round any numbers this morning, it's all just a blur. Sorry about that. My performance has been absolutely lousy this week, for which I apologise. Will try harder next week.

Have a good weekend all.

Regards, Paul.

(of the shares mentioned today, Paul has a long position in HHR, and no short positions.

A Small Caps Fund to which Paul provides research services also has a long position in HHR)