Small Cap Report (21 Mar) - The Budget, XPS, BMY, PMP, ESCH, DOTD, DEMG

Thursday, Mar 21 2013 by

Pre 8 a.m. comments

The Budget yesterday contained a positive measure for small cap investors, in that 0.5% Stamp Duty is to be abolished for AIM shares. That's a useful step in the right direction, which I'm pleased about. We need to tackle ridiculously wide bid/offer spreads next, which is badly needed in order to create a small caps market that is attractive to investors. Wide spreads is by far the biggest problem for the UK small caps market.

Apart from that, the Budget measures seemed just more tinkering from the political class who have hardly any real world commercial experience between them, and who place more emphasis on presentation, tactics, and squabbling with each other, than with any sort of deep thinking about policies.

The two big mistakes made by this Coalition, in my opinion are;

1. They have crushed confidence by constantly talking down the economy and the prospects. Austerity isn't real austerity, since public spending is actually still rising. If you're going to talk tough, then be tough, and get the difficult decisions out of the way. Instead they have talked tough, but been weak, with the result that we have a continuous narrative of doom & gloom. This does affect the decisions of the public, and to a lesser extent, of businesses.

2. Companies (even quite large ones) find it very difficult or impossible to obtain secure, long-term funding from the Banks. Facillities are only renewed for 2-3 years in almost all cases, and the bottom line is that the Banks are still considerably under-capitalised, and are not lending in a way which is needed for sustainable economic growth. We should fully nationalise RBS and Lloyds HBOS, pour in however much money is needed, and tell them to get out there and lend long-term to people with sound business propositions.


Turning to individual company results, Peter Jones of TV's "Dragons Den" holds 42% of a small technology etailer called Expansys (LON:XPS). He gives the impression of knowing what he's doing as an investor, when he's busy crushing the aspirations of delusional members of the public on TV, but he certainly seems to have taken his eye off the ball at XPS. They've put out another profits warning, and it's a pretty bad one, where they say (my bolding added):


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Bloomsbury Publishing Plc is a global publisher. The Company is involved in the publication of books and other related services. The Company operates through four publishing divisions: Adult, Children's & Educational, Academic & Professional, and Information. These divisions derive their revenue from book publishing, sale of publishing and distribution rights, management and other publishing services. It specializes in the humanities and social sciences, and publishes over 1,000 books and digital services each year. The Company's digital products include Berg Fashion Library, Bloomsbury Collections, Bloomsbury Fashion Central, Churchill Archive and Drama Online. The Company's subsidiaries include A & C Black Limited, Bloomsbury Publishing Inc, Bloomsbury Information Limited, Bloomsbury Professional Limited, Bloomsbury Australia PTY Limited, The Continuum International Publishing Group Limited and Osprey Publishing Limited, among others. more »

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Portmeirion Group PLC is a United Kingdom-based company, which is engaged in providing ceramic tableware, cookware, giftware and tabletop accessories. The Company has five brands: Portmeirion, Spode, Royal Worcester, Pimpernel and Wax Lyrical. The Company's segments include UK and US operations. Portmeirion offers tableware and gifts with collections, such as Sophie Conran for Portmeirion and Ted Baker collection. Spode brand includes Blue Italian, Blue Room and Christmas Tree. Royal Worcester is engaged in providing porcelain tableware and cookware collections. Pimpernel provides placemats, coasters, trays and accessories. Pimpernel also includes Wrendale Designs collection, which includes placemats, coasters, trays, ceramic and melamine gift sets. Wax Lyrical offers fragranced candles and reed diffusers. The Company caters to markets, such as United States, the United Kingdom, South Korea, India, Taiwan and Thailand. more »

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14 Comments on this Article show/hide all

Blackthorn Focus 21st Mar '13 1 of 14

You can hear from management of Portmeirion (LON:PMP) at the forthcoming AIM Investor Focus event on April 17th.

Other companies presenting are Judges Scientific (LON:JDG), Mattioli Woods (LON:MTW), RWS Holdings (LON:RWS) and WYG (LON:WYG).

Private investors can attend the event free of charge. If you would like to attend the event, register your interest here:

David O'Hara, Blackthorn Focus

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Edward Croft 21st Mar '13 2 of 14

Paul - I'm a huge admirer of email marketing platforms actually - if used well and not abused it's a very useful tool to build and maintain trust. The key point is to be a trusted and welcome entrant into somebody's inbox on a weekly, daily or monthly basis, not a spammer - unfortunately in this business there are loads of spammers !

Companies like Mailchimp and dotDigital (LON:DOTD) have to do a huge amount of work to not get blacklisted by email companies... and it's all got way more professional than the bad old days.

The attractive thing about these SaaS email businesses is that they really do lock in customers, and businesses rely on them to generate revenues (restaurants emailing offers etc). He made it v. clear that the pain of shifting from one platform to the other is too much for most customers (switching costs)- certainly I'd hate to have to move my lists from Mailchimp to another provider. I thought his candour about how difficult it is to acquire and integrate businesses due to this fact was quite admirable.

I do wonder though how they are really going to scale up DotD without a big SME push the way the big international firms manage it. Their approach appears to be more about the other end of the food chain - getting BP on board etc. Interested in anyones thoughts on this.

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marben100 21st Mar '13 3 of 14

In reply to post #71828

Hi Ed,

Thanks for attending and presenting last night.

Thanks also to Paul for coming along and for posting his thoughts.

I do think the Stockopedia figures, which you kindly provided for us to include in the delegate pack, were useful for delegates.

I do wonder though how they are really going to scale up DotD without a big SME push the way the big international firms manage it.

As always in these events it's hard for a company to tell the whole story in the 35 minute slot that time permitted. I attended the company's rather longer interim results analyst presentation. From that, my understanding of their growth strategy was that it was geographical (and by broadening their product offering, eg dotSurvey), rather than to change their mid-range focus.

That means that we are not likely to see sudden, explosive, growth,but hopefully a nice, steady progression instead.

Their recent addition of full multi-lingual capability is an important part of that strategy. At the interims presentation, Peter mentioned that they could now add (for example) Chinese language capability in 2-3 weeks, if there was a requirement for it.

Note this from the interims:

Our sales office in New York opened at the end of November with the first corporate client win achieved just before the Christmas holiday and since then the level of orders and sales pipeline has shown an encouraging trend. In late January we opened a sales office in Melbourne Australia and have started building an order book.

Now that the user interface of dotMailer has been translated into eight languages we plan to trial selling into selected European countries using native speakers based from our London offices during 2013 and working with international channel partners.

DISCLOSURE: I hold shares in dotDigital



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Paul Scott 21st Mar '13 4 of 14

In reply to post #71828

Hi Ed,

Thanks for that - very interesting thoughts. I have also started using MailChimp for my Equity Active notes, and really like it. It's brilliant the way it cleans up the email list, ranks people by the level of interest they have in your emails, and of course anyone can opt out of the list at any time since there is an unsubscribe link in every email.

It's actually extremely annoying & unfair when readers report you as Spam even though you've given them an unsubscribe link in every email you send them! So having seen the other side of the fence, I would urge people not to report legitimate emails as Spam, if there is an unsubscribe link provided, just click on that.

I agree that the chap from DOTD presented very well, and came across as honest, giving straight answers, and a balanced view - as opposed to just pumping the bull case, and concealing the downside risks, as is often the case with company presentations.

As you say, it's very much down to the end user of the software to ensure that the emails they send the people on their list are interesting & relevant, not sent too frequently, and welcomed by recipients. I tend to use my lists very sparingly, so that when people get something from me, they know it's worth reading (hopefully!). Your heart sinks when all the unsubscribes come through, but once the people who really don't want to be on the list are gone, then you have a really good list of people who enjoy reading your content.

Once you're set up on a program like MailChimp (and presumably DOTD), then as you say, it would be a real hassle to change, so these clients have stickiness - I was impressed with DOTD's churn rate, which he said is only about 5% p.a. for larger clients - that's really impressive.

Cheers, Paul.

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loglorry 21st Mar '13 5 of 14

Don't know MailChimp well but there are plenty of similar products out there many of which are free or near free. For example "mail list controller". Email marketing is almost useless however unless you have a very good email list. Email in general a very bad way to communicate with customers in my view.

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Edward Croft 21st Mar '13 6 of 14

In reply to post #71832

5% for large clients, 6-7% for mid and 16% for SMEs I think. Mark muzzled me before I got a chance to ask my last question ;-) which was to ask about upgrades within the subscription. i.e. Some SaaS products can create a negative churn as the extra revenues from current subscribers (through upgrades) more than makes up for the churn of lost subscribers. That's a sweet spot to get into for a business. I'd have liked to see more detail on the so called customer acquisition costs and lifetime value of the customers - but as Mark says not much ability to get to the nitty gritty in shorter sessions !

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Cisk 21st Mar '13 7 of 14

Paul, I'm a great fan of Deltex Medical (LON:DEMG) so read your comments with interest. I've held them for nearly 10 years now - and have thrown out my self-imposed (largely useless in this respect) rulebook because I've broken probably every rule in there as far as this holding is concerned.

It's always been a jam tomorrow company - all I can say is that the future looks more promising for them than it ever has in the past and yet the share price hovers around the mid-to-late teens. It plummeted from the lofty highs of 27p since last November - from what I gather a large (forced) seller (a fund liquidating many positions, from memory) has driven the price down, creating a large overhang in the stock.

They finally have NICE standard-of-care endorsement and this should feed into probe sales in the current year, and there are encouraging signs of progress in the US (even though it's taken some case to get it going in terms of 'sponsorship' with a partner).

They will arrive at break even soon and then it only takes relatively small increases in probe sales to hit the bottom line. All the empirical evidence supports the health and financial benefits of using the probes - and it's taken a very long time to get to this stage - as you can imagine, surgeons in operating theatres are (rightly so) a slow moving bunch when it comes to adopting new, unproven technologies.

It's not one for widows and orphans and the mkt cap still assumes that growth expectations will be met - however if this happens, then I can see the stock re-testing the 27p level once more.

Also heads up on Stockopedia - been a (free) user for nearly 4 years now but took the plunge this morning.  It's a fantastic site (no I'm being paid to say this) - there is so much data there, and if I'm honest I think I'll need a training course to understand a lot of it.. But just from dipping my toes in the portfolio and stock screen sections, it's an extemely powerful tool.  I just need to persuade them to add functionality that's in my excel portfolio tool and add more info on shareholdings etc and I'll be smiling all the way to the selection of my next winning stock ;-)

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Edward Croft 21st Mar '13 8 of 14

In reply to post #71838

Cisk - you could send me your excel file and we'll take a look? Constantly in development and keen to improve and build the features that people actually want rather than what we think they want (and I think a lot!!!)....

We've added a range of introductory educational videos that are well worth a look:

We need to do some seminars to really help people make the most of it so will get something planned - we do have a session at Master Investor next month too.

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Cisk 21st Mar '13 9 of 14

Hi Ed, can you drop me your email?

The spreadsheet is a bit of a mess and rather embarrassing to send through in its current state - however I can certainly show examples of what I've got in there and send it through once it's tidied up. I'm going to Master Investor next month so would be keen to attend the session and catch up with you.

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Fugwit 21st Mar '13 10 of 14

Ancedotaly I had a snoop around the publishing & media expo at Earls Court in Feb looking for ideas, I believe it is the largest of its kind in UK. There were a good handful of email publishing solutions on show there of various sizes, the largest stand belonged to dotdigital whom I spent a good half hour hands on with them running through their product offering.. The ease of use of their email publishing software is really top notch, it was smooth, logical and they have plainly worked hard to avoid lumping the user with tricky workarounds as is so often the case with such offering. The stand itself was the most impressive in that field and busy for the whole morning that I was there. The sales people were knowledgeable and driving to sign up new business as you would expect. I know email marketing has come on a long way since the bad old days of hardcoding everything in html and then batch sending through the evening, but these guys are really driving the simplification of the process for any business out there, no matter their size. Long and short I believe their product compares very favourably,

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Edward Croft 21st Mar '13 11 of 14

In reply to post #71841

Cisk - I'll be on the stand all day so there will be plenty of time to talk. If you want to show me anything in the interim there's an 'attach a file' link when you click the green feedback button on the right. As mentioned - portfolio features are in development and getting better all the time, so the more feedback the better at this stage.

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ericb 21st Mar '13 12 of 14

In reply to post #71832

Paul - like your new pic :)

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marben100 21st Mar '13 13 of 14

In reply to post #71835

Mark muzzled me before I got a chance to ask my last question ;-) which was to ask about upgrades within the subscription.

LOL - sorry Ed, but had to give other audience members a chance to ask Qs! It's a tough dilemma running these things: ideally one would like to give people as long as is needed to ask Qs, but if I did that we'd end up finishing around midnight - which wouldn't be too popular. There's always a chance to ask further questions during informal sessions in the break or with refreshments afterwards. Case of optimising several variables:

  • Can't start too early or finish too late, so as to fit in with delegates other commitments & travel arrangements
  • Want enough companies to present to justify the effort of attending, for delegates
  • Need to give as much time as poss. to each company


Will tweak slightly next time & extend each company session from 35 to 45 minutes, by dropping some of the introductory stuff.



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Paul Scott 21st Mar '13 14 of 14

In reply to post #71849

Good idea Mark. The audience are experienced investors, know the format, so I suspect most would prefer to just get cracking into the company presentations, rather than having introductory talks.
Then wrap up and have some food/drink, as presentations are quite tiring after a normal day's work. So personally I prefer not letting the Q&A drag on too long when tummies are rumbling. If it drags on too long, then people who need to catch trains hardly have any time to socialise afterwards.
But as you say, difficult to balance up several variables & keep everyone happy.

You did very well though, it was an excellent evening. Name badges were also a great idea, and encouraging people to actually wear them is always good. I know most of the people there, but cannot remember many names, let alone BB pseudonyms, which can make it quite awkward as I'm wracking my brains to remember who I'm talking to!!! So the people who wore their name badges helped greatly.

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About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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