Small Cap Report (31 May) - HVN, VNET, DQE, RGO, MRM

Friday, May 31 2013 by

Good morning!

It's a quiet morning for announcements, so I won't split the report into pre and post 8 a.m. sections today.


Harvey Nash (LON:HVN) announces a mixed trading statement. However, the key summary paragraph indicates that trends improved into Q2, and that they are confident of meeting expectations for the full year. That's all that matters really, so despite having some negative detail, the overall picture sounds OK, so it's not a profits warning.

Harvey Nash has been on my watch list for some time, and as you can see from the table on the left, it looks good value on the key PER and dividend yield bases.

It also reported net cash of £5m at the last Balance Sheet date of 31 Jan 2013.

It's diversified geographically, with 62% of revenues coming from outside the UK/Ireland.

Overall, it gets a positive quick review from me, and I might buy some on any dips.



Vianet (LON:VNET) (one of my largest personal holdings) announce the recruitment of a veteran Non-Exec, with what looks like highly relevant industry experience. So I like the look of that. Good Non Executive Directors can add enormous value to a business, so I like to see relevant & experienced people being recruited, not just box-tickers who happen to be mates with the CEO. They're supposed to be independent of course, but not many actually are in reality.

Vianet are due to announce results on Tue 11 June. So let's hope they've finally made some progress on contract wins, after interminable delays.


Looks like a quiet start today, with the FTSE 100 Futures essentially flat (down 5 points). Market opens in a few seconds, so I'll hit the publish button now.


I see that shares in Harvey Nash (LON:HVN) have dipped 2p to 69p. I'm not surprised, as the wording of the IMS this morning did begin to read like a profits warning, but then says they are in line with expectations at the end. So not the best presented IMS I've seen, so that might give me a buying opportunity, although I'd want a lower price than this to give me enough margin of safety.

I've mentioned…

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Harvey Nash Group plc is a United Kingdom-based recruitment business company. The principal activity of the Company is the provision of professional recruitment and offshore solutions. The Company's segments include United Kingdom & Ireland, Mainland Europe and Rest of World. Services provided by each segment are permanent recruitment, contracting and outsourcing. The Company provides executive search, interim management and leadership consulting services. Its leadership services include board evaluations, management development, audits, assessments and strategic human resource (HR) consulting. Its professional recruitment services include technology recruitment business and recruitment solution business. Its offshore services include projects and software services, which provides application development, third party software maintenance and outsourced software services to clients across the world, and managed services/business process outsourcing. more »

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Vianet Group plc is a provider of real time monitoring systems, data management services, and actionable insights for the leisure and vending sectors. The Company's segments include Leisure Services, which includes design, product development, sale and rental of fluid monitoring equipment, data management and related services; Vending, which includes design product development, sale and rental of machine monitoring equipment, data management and related services; Technology, which includes the provision of data management and technology related services, and Fuel Solutions, which includes wet stock analysis and related services. Its Leisure division consists of the core beer monitoring business (including the United States), and gaming machine monitoring. Its subsidiaries include Brulines Trustee Company Limited, Vianet Americas Inc and Vianet Limited. more »

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  Is LON:HVN fundamentally strong or weak? Find out More »

6 Comments on this Article show/hide all

Edward Croft 31st May '13 1 of 6

Hi all - Paul has completely missed the most important news of the day which is that you can now sign up to his Small Cap Report by email and RSS - while we've put together a new 'column' landing page at this link -

There's some nifty search and archive widgets too. If you are in a hurry - here's the link to the email list - it's unfortunately going to require you to enter & confirm your email address - we'll be providing a one click sign up for registered members in due course -

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Edward Croft 31st May '13 2 of 6

Has 2Ergo (LON:RGO) changed biz models or something ? The revenue decline has been vicious over the last few years - from £33m to £8m ... that kind of trend is definitely one for braver souls than me.

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Paul Scott 31st May '13 3 of 6

In reply to post #73760


Yup 2Ergo (LON:RGO) has ditched it's old stuff, and focussed entirely on 2 new products where they see the best potential. It's not going at all well so far, as the figures demonstrate!
So it should really be seen as blue sky now - if they manage to commercialise the new products, then it could be 10-20 bagger in my view.
However, they need cash urgently, and are almost out of options. Nigel Wray might stump up the cash, so it's a gamble on whether he values the Listing & hence doesn't want to shaft existing shareholders too much, or whether he just decides to take it private & refinance it at a level that wipes out existing holders. Hence far too risky right now, but once properly funded it might be worth a punt, with money one can afford to lose.

Thanks for the work your development team have done to get me my own landing page & email list, that's an excellent development that I hope people will find useful.

Cheers, Paul.

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Entrust 31st May '13 4 of 6

Hi Paul

Re HVN, you said:-

I see that shares in Harvey Nash (LON:HVN) have dipped 2p to 69p. I'm not surprised, as the wording of the IMS this morning did begin to read like a profits warning, but then says they are in line with expectations at the end. So not the best presented IMS I've seen, so that might give me a buying opportunity, although I'd want a lower price than this to give me enough margin of safety.

I've mentioned this to a couple of financial PR experts in person, but in my view trading statements should be given a clear title which reflects the true overall message. Not spin, but truthful. So in this case, HVN should have titled their statement, "On track to achieve its expectations for the full year", which is the most important sentence in the statement, but is actually the last sentence! It shouldn't be the last sentence, it should be the first! Clarity is everything with trading statements in my opinion.

Much as I hate to be fair to companies :-) .....but in the second paragraph under Current Trading they DO say things are on track:-

Current Trading

  There has been no change in the Group's trading since the full year preliminary results announcement on 30 April 2013.

  As expected, and stated in the preliminary announcement, the Group experienced a slower start to the first quarter of the current year as a result of the general caution in the market, weakness in Europe and the impact of seasonality on our Vietnamese and Hong Kong businesses. Notwithstanding this, the Board remains confident that the Group is on track to achieve its expectations for the full year.

So they were pretty upfront about that AND reitererated it at the end for good measure.

Thanks for all the great work on the Small Cap Report :-)



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Chrisfarrell21 31st May '13 5 of 6

Although not a small cap, on the topic of of clarity of statements from companies, this one issued today by Ryanair Holdings (LON:RYA) takes some beating:


There's a lot not to like about Michael O'Leary, but you are never left in any doubt on what he's trying to say.

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Paul Scott 31st May '13 6 of 6

In reply to post #73765

Hi Entrust,

Yes, fair point!

I still would like the key point to be flagged up as the actual title of the announcement though, as otherwise you're reading an announcement like today's from HVN, trying to work out whether it's good or bad, and getting conflicting signals as you read it.

Cheers, Paul.

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 Are LON:HVN's fundamentals sound as an investment? Find out More »

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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