I Read The News Today Oh Boy! 11-Oct-2017

Wednesday, Oct 11 2017 by

Morning All!

Proactis Holdings (PHD)

Final Results For The 12 Months To End July 2017 – Can easily pick out that Revenue is up by 31% to £25.4m vs £19.4m last time – But this is below the £26m forecast on Stockopdeia. This is a company that likes acquisitions, which I am not a huge fan of. It typically makes for difficult to understand updates (for me anyway), like this one – EBITDA up 49%, Statutory Operating Loss of £2.6m vs £1.9m Profit last time, EPS up 25% to 9p – Which seems ahead of forecasts. This just goes into the “too difficult” for me basket – I will invest in companies whose numbers I can better understand.

Vertu Motors (VTU)

Interim Results For The 6 Months To End August 2017 – Revenue flat, Margins flat but Adjusted PBT is up 7.2% to £20.9m vs £19.5m last time. Interim Dividend up 10% and Buy-Back to continue up to £3m. If I had to pick a Car Retailer it would be this one. I quite fancied an entry around the 40p area a while back but was hesitant – Still quite like it even at these levels, PER is still 6.78.

Quiz (QUIZ)

Pre Close Trading Statement For The 6 Months To End September 2017 – Group revenue up 35% (online Revenue is up 204%) to £56.1m vs £41.5m last time. Gross margins remain in-line with expectations. Up 10% in the past week ahead of this statement (insiders?), on a PER of 24.6 I am slightly tempted to get involved here.

Telford Homes (TEF)

408p - £307.6m

Trading Update For The 6 Months To End September 2017 – Not sure how to take this one, seems to be some confliction. “As anticipated, due to programmed timing of development completions, pre-tax profit for H1 2018 expected to be significantly lower than H2 2018 and lower than last year” followed by “On track to exceed £40 million of PBT for the year to 31 March 2018 in accordance with market expectations” – My take away is that this is in-line, is it?

Veltyco (VLTY)

eSports Partnership – I am getting quite involved in the eSport “revolution” (I mean in terms of investments only, e.g. I currently have a holding in £ GMD, £ QXT and £ GFIN at present). I see this partnership as good news for Veltyco and although I don’t agree with some of their activities (e.g. Binary betting) – On a PER of 13.6 this could be potentially a bargain entry point. I have opened an initial Long position here this morning.

Speedy Hire (SDY)

Amendment And Extension Of Bank Facilities - This seems like great news “"We are delighted with this successful outcome which reflects our bankers' confidence in the business.  At 30 September net debt is now expected to be less than £65m, and this revised facility, with significant headroom, gives us greater flexibility to support our strategy for growth, and lowers our cost of debt."”

Will be keeping an eye on VLTY after taking an initial Long position this morning and also QUIZ in which I may also be tempted (actually I did open an initial Long here this morning too)…


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PROACTIS Holdings PLC is a United Kingdom-based company, which is a Spend control and e-Procurement solution provider. The Company is engaged in the development and sale of business software, installation and related services. It offers a range of solutions, such as PROACTIS Source-to-Contract, PROACTIS Purchase-to-Pay and PROACTIS Supplier Network solutions. It offers managed services, such as procurement-related managed services, such as Sourcing and Content Management; Finance-related managed services, such as Invoice Data Capture and Accelerated Payment Facility, and information technology (IT)-related managed services, such as Application Hosting & Management. Its Solutions for Finance and Procurement include cloud, hosted or on-premise software applications. PROACTIS Spend Analysis offers company-wide data on users' laptop, tablet or mobile. Its PROACTIS Invoice Data Capture turns paper, fax and Portable Document Format (PDF) invoices into system-ready electronic records. more »

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Vertu Motors plc is an automotive retailer in the United Kingdom. The principal activity of the Company is the sale of new cars, motorcycles, and commercial vehicles and used vehicles, together with related aftersales services. The Company is engaged in the provision of management services to all subsidiary statutory entities. The Company operates a chain of franchised motor dealerships offering sale, servicing, parts and bodyshop facilities for new and used car and commercial vehicles. The Company also operates various franchise dealerships, such as Volvo, Volkswagen, Land Rover, Audi, Mercedes-Benz and Jaguar, and operates Honda dealerships in the United Kingdom. The Company operates approximately 125 franchised and over three non-franchised operations across England and Scotland. The Company's subsidiaries include Bristol Street First Investments Limited, Bristol Street Fourth Investments Limited, Vertu Motors (VMC) Limited and Grantham Motor Company Limited. more »

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QUIZ plc is United Kingdom-based global women's wear brand company. The Company is focused on providing occasion wear and dressy casual wear primarily for 16 to 35 year olds and offers clothing, footwear and accessories. The Company’s occasion wear provides maxi and mini dresses, matching tops and bottoms, and footwear, bags and other accessories that are designed to complement a particular outfit. The Company’s dressy casual is designed to provide the latest on-trend clothes, shoes, bags and accessories that have a glamorous edge. In addition, the Company’s products includes denim, playsuits, shirts, tops and skirts. The Company also provides a range of outerwear such as faux fur jackets, parkas and biker jackets. Footwear offers dune River Island, missguided and ASOS. The Company’s brand operates in 19 countries through 65 international franchise stores, concessions and wholesale partners. more »

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17 Posts on this Thread show/hide all

Ramridge 11th Oct '17 1 of 17

morning matylda

Profit warning from Character (LON:CCT) share price down 17% as of now

" At this early stage of the Group's new financial year the Board consider that, based on the latest sales and market data available to them, the Group's performance for the year ending 31 August 2018 is now expected to be significantly below current market estimates ""

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matylda 11th Oct '17 2 of 17

In reply to post #227223

Cheers - Spotted that - Not good!

Also INSE change of management seems to have had an impact but now recovering.

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Fegger 11th Oct '17 3 of 17

In reply to post #227223

dropped significantly yesterday and I wondered why. Now becomes obvious. But of course outsider holders didn't have the same access to information.

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MrContrarian 11th Oct '17 4 of 17

My morning smallcap tweet:
ZAI Corp Finance bombshell - disqualified as nomad. Clients need new one by 19 Oct. Clients: UKRproduct, Alpha Returns, GCM Resources ,Central Rand Gold, Univision, Eqtec, Obtala, Northwest Investment Group, Zibao Metals, Grand Group, Clear Leisure, Polo Resources
Only 4 have RNSed so far https://www.investegate.co.uk/Index.aspx?searchtype=1&words=zai

Speedy Hire (LON:SDY), QUIZ (LON:QUIZ), Character (LON:CCT)

Speedy Hire (SDY) £180m asset based finance facility extended by 3 years to October 2022. Interest shaved by 25bp. "At 30 September net debt is now expected to be less than £65m, and this revised facility, with significant headroom, gives us greater flexibility to support our strategy for growth, and lowers our cost of debt."
QUIZ (QUIZ) H1 trading. Rev up 35%, gross margins in line.
Character Group (CCT) warns FY will be significantly below forecasts. Why did they put this out at 8am exactly?

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Ramridge 11th Oct '17 5 of 17

In reply to post #227243

yep. AIM market will never be a level playing field as long as the regulators are asleep at the wheel.

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shine66 11th Oct '17 6 of 17

In reply to post #227253

There should be a select committee looking into the failure to regulate AIM.

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timarr 11th Oct '17 7 of 17

In reply to post #227288

The point of AIM is that it's lightly regulated, otherwise it would just be the main market.

If I remember correctly the last time Character issued a profit warning, a few years ago, there was also significant movement ahead of the announcement. It's been on my blacklist ever since.


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Howard Adams 11th Oct '17 8 of 17

Hi any Mondi (LON:MNDI) holders

Does anyone interested in Mondi (LON:MNDI) have a view as to whether todays trading update ought to be viewed as a profit warning, or a softening up for harsher news later, or a cautious management handling current conditions well but who are sensing tough conditions ahead? Revenues and margins are up, but so are costs and currency headwinds.

At time of writing it is down over 8%. It hit a share price high 05/10/17 2130p now down to 1907p over 10% down, so might it be profit taking coupled with an expectation that the update was expected to be more upbeat than it turned out to be? As I type the fall seems to be reducing, hovering around 7% down.

Any thoughts would be welcome (I hold).


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marben100 11th Oct '17 9 of 17

In reply to post #227313

Hi Tim,

Whilst I agree that the whole point of AIM is to have a less onerous regulatory regime than that of the main market, for more dynamic, less mature firms, the failure lies in enforcement.

The rules are there but there is little visibility over enforcement. ShareSoc is in a continuing dialogue with the LSE about this, trying to get some improvement.

Another problem is regulatory fragmentation. Any issue concerning insider trading falls under the remit of the FCA, who are responsible for enforcement of market abuse regulations, rather than AIM. Other bodies such as the FRC get involved in matters of accounting failures and the SFO gets involved where criminal fraud takes place. This diagram attempts to explain who's responsible for what: http://www.londonstockexchange...

We need to battle all these bodies to seek improved enforcement. It's a tough battle but we will persist.


Mark B

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Ramridge 11th Oct '17 10 of 17

In reply to post #227328

Hi marben100

Firstly let me say that we the PIs should be very thankful and grateful for the efforts you are making to improve the workings of the AIM market.

However despite your battling over the past years for improvement, I for one do not see any material change. The market is as rife as it has always been in terms of insider trading, rogue management, dubious accounts, plain thieving and so on.

So if your efforts feel like pushing water uphill, maybe fresh lateral thinking is required that would make a real difference?

How about using the 'wisdom of the crowd' approach and asking the PI community for fresh ideas?

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ls2g08 11th Oct '17 11 of 17

In reply to post #227323

I'm debating this myself. I have held Mondi for a few years now. Just thinking out loud - at the end of the day it sells to some extent; a commodity product so it will always be vulnerable to such events. How efficient management and how well the company operates will determine the long term value of the share.

It has shown it has some pricing power as clearly it has been able to pass on cost increases to customers seen by increased so a buy or sell decision shouldn't be wholly based on input costs and FX. Unless of course you have a view these issues will continue or increase.

Looking on my Bloomberg terminal I can see it's actually trading and a modest discount to it's competitors despite having above average profitability figures.

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marben100 11th Oct '17 12 of 17

In reply to post #227353

Hi Ramridge,

All sensible suggestions gratefully received - please join the campagn and/or ccontact us via the website. However, I believe that this will be an ongoing battle. Some changes by AIM are in train right now, and we are participating in consultations on those changes. If the changes are inadequate, we will seek to apply political pressure for further change, probably via the FCA who regulate the LSE.

Folks writing to their MPs may help us to apply that pressure.

Mark B

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timarr 11th Oct '17 13 of 17

In reply to post #227433

Hi Mark

As I'm sure you're aware, I'm fully aware of the issues with AIM regulation and the need to improve it. However, my point is different: until such time as there is an improvement investors need to manage the risk around AIM stocks in an appropriate manner taking into account the lax regulatory enforcement.

There is a tendency among private investors, particularly less experienced ones, to treat all shares the same and then to blame the regulators when something goes wrong (actually there's a more general tendency among investors to blame anyone other than themselves when things go wrong). The fact is that AIM stocks are more risky than those traded on the main market and investors should manage the risk around that themselves through more careful due diligence, position sizing, diversification or simple avoidance.

That doesn't mean regulatory enforcement shouldn't be improved, it should. But I rarely see any discussion of the additional risks associated with a share that's AIM listed until after it goes wrong ...


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shine66 11th Oct '17 14 of 17

In reply to post #227583

We all know what it feels like to be invested in a company where management turn out to be useless and we lose money. We accept it. It's unfortunate but it happens. No-one is complaining about regulatory failure then. Quite seperate from that is when companies pull a fast one, rip investors off - and there are no consequences. Why not? Rules, even the fairly limited ones of AIM, should count for something, or else just drop the pretence and get rid of the regulators altogether. 

I'd argue that discussion about AIM risk is going on, and not just when a company decimates shareholder value, and questions are asked. It's going on here within Paul's blogs, it's going on over at Tom Winnifrith's Shareprophets website, it's going on when the BBC specifically interviews Stuttard about the frauds and where he has the brass neck to say, 'it's called risk capital for a reason!'. It's going on when an FCA consultation invites comments, (like last summer), and it's going on when Sharesoc lobbies.

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Howard Adams 12th Oct '17 15 of 17

In reply to post #227418

Hi Is2g08

Many thanks for your thoughtful response.

I agree with your thoughts.

Abstracting Mondi (LON:MNDI) into a simple input, process, output model does suggest its not a time to sell.

As you point out, although inputs have increased (i.e. materials), Mondi's command of its processes seem robust (i.e. margins increased) as are its abilities to pass higher costs through to its outputs (i.e. product prices).

Thanks for framing your points as you did it helped me to rethink things.


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Ramridge 12th Oct '17 16 of 17

In reply to post #227583

Hi timarr -
I think there is a distinction between understanding and accepting the inherent nature of the risks involved and the game being "bent". Let me explain by way of analogy.

In a game of poker, the player who has a better understanding of the odds and can "read" the game in terms of actions and reactions of the other players, will in the long term be successful.
However the same player playing in a game where the cards are marked, will always lose.

My contention is that the AIM market is inherently more risky than the main one (fair enough and you got to take the rough with the smooth), and it is also in part crooked (not acceptable).

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timarr 12th Oct '17 17 of 17

In reply to post #227798

Hi Ramridge

We are furiously in agreement. My point is, that if you think the game is crooked you have two choices - either don't play or take extra care if you do. If you play in a game you know is crooked as though it's not and you get fleeced then you're just throwing away your money. As the old adage goes - if you don't know who the sucker is at the table, it's you.

There's a famous paper called "Is AIM a Casino?".

Basically the paper shows that 32% of AIM IPOs fail within 5 years of listing. It also shows that the factors most likely to improve survival rates are the age of the company when listing - older companies have better survival rates - the market cap at listing - larger is better - and the quality of the Nomad.

Using those three variables as filters helps ensure you're not the sucker - and if I'd stuck to them I wouldn't have invested in Accrol, on the final count. Sometimes you've got to get burnt to go back to first principles :-/


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