Small Cap Value Report (10 June 2019) - DIS, CDM, WPCT, TRD, ACRL, ALM, AVN

Monday, Jun 10 2019 by

Good morning!

Some things  on my plate today:



Distil (LON:DIS)

  • Share price: 1.775p (-7%)
  • No. of shares: 502 million
  • Market cap: £9 million

Final results

(Please note that I do not have a holding in Distil, having sold my holding today.)

I've been at my desk for a couple of hours already this morning, prior to writing this, trying to generate a firm view on Distil's results.

In the end, I've sold out my entire position.

Regular readers will know that I hate selling things. Especially illiquid micro-caps with a wide spread. My default position is to hold on to things for as long as possible.

Indeed, this is my very first sale of 2019. I was proud of having gone nearly six months without making a single disposal.

What's happened?

Distil is a small developer of alcohol spirits brands, and has delivered results today which are in line with the forecasts from Progressive Research. Sales are up 19% and the company has generated profits for the second consecutive year: £160k in operating profit, around the same as last year.

I can summarise the good points in today's statement:

  • Growth in sales volume of Redleg Spiced Rum accelerates to +45%. Has attracted a loyal customer base. "Very positive" reponse to the new Caramelised Pineapple flavour.
  • Again with respect to Redleg: there is "increased availability across all trade channels but especially in the growing number of independent bars, pubs and restaurants serving RedLeg Spiced Rum."
  • Group gross margins (before advertising costs) improve to 60%.
  • The cash balance improves slightly and continues to stand in excess of £1 million.

Unfortunately, there are a few reasons for concern, in my view.

Firstly, the non-Redleg brands performed very poorly. I didn't place much value on them, anyway, but even so: revenue from Blackwoods Gin has…

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All my own views. I am not regulated by the FSA. No advice.

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Distil Plc is a United Kingdom-based holding company. The Company is engaged in marketing and selling of Blavod Black Vodka, Blackwood's Gin and Vodka, Blackwood's Limited Edition Vintage Gin, Diva Vodka, Jago's Vanilla Cream Liqueur and RedLeg Spiced Rum domestically and internationally. The Company markets and sells its brands in various international markets, including the United Kingdom, the United States, Germany, Spain, Australia and Russia. RedLeg is a premium Caribbean rum, infused with spices. Jagos is the vodka-based cream liqueur with a vanilla cream flavor made with whole cream. Blavod is made using grain vodka, triple distilled and double filtered. The Company's subsidiary is Distil Company Limited. more »

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Codemasters Group Holdings PLC, formerly Codemasters Group Holdings Limited, is a United Kingdom-based video game developer and publisher. Through its subsidiary, The Codemasters Software Company Limited, the Company designs, develops and produces driving and racing games. The Company’s driving and racing games include DiRT, GRID, Micro Machines, ONRUSH and Formula 1 series of videogames. It produces Formula One’s range of games for the Playstation 4 console. more »

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Woodford Patient Capital Trust PLC is a closed-ended investment company. The Company's principal activity is investment in quoted and unquoted equities of companies incorporated or listed predominantly in the United Kingdom. The Company's investment objective is to achieve long-term capital growth through investing in a portfolio consisting predominantly of the United Kingdom companies, both quoted and unquoted. The Company is focused on investing in mid and large-capitalization listed, mature companies; early-stage companies, which are typically quoted and unquoted companies. The Company's portfolio is diversified across various sectors, which include healthcare, financials, industrials, technology, consumer goods and telecommunication industries. The Company's portfolio manager is Woodford Investment Management Ltd. more »

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

30 Comments on this Article show/hide all

jonno 10th Jun 1 of 30

Seems there has been a bit of a Board fracas at MJ Gleeson (LON:GLE) with the CEO going with immediate effect
Reading the RNS it appears to b about salary. If that is the case and the Board have said no then it is perhaps a good thing given the current sentiment against excessive pay. MJ Gleeson (LON:GLE) are one of the few builders worth holding in my view and the news might create an opportunity to add
I hold.

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Howard Adams 10th Jun 2 of 30


Codemasters Group (LON:CDM) first year on AIM results seem quite good, with growth potential in growing games sector. Particularly attractive are the increasing build up of Games-as-a-service as this is scalable.

Extract from the RNS .....

Financial highlights

· Revenue increased 11.9% to £71.2 million (FY 2018: £63.6m)
· Gross profit increased 16.0% to £62.4 million (FY 2018: £53.8m)
· Gross margin increased 3.0% to 87.6% (FY 2018: 84.6%) - due to a higher proportion of digital sales which now represent 59.2% of total (FY 2018: 41.3%)
· Adjusted EBITDA1 increased 59.8% to £18.7 million (FY 2018: £11.7m)
· Adjusted earnings per share2 increased by 64.1% to 13.3p (FY 2018: 8.1p)
· Net cash of £18.2 million (FY 2018: net debt of £112.9m)

Full RNS here ...

I held for a while but sold (grrrr). Will watch market reaction and might re-enter.


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MrContrarian 10th Jun 3 of 30

My morning smallcap tweet: YOLO NAV may go low.

Yolo Leisure and Technology (LON:YOLO), HgCapital Trust (LON:HGT), Seeing Machines (LON:SEE), Dods (LON:DODS), Helical (LON:HLCL), Agronomics (LON:ANIC), Redx Pharma (LON:REDX)

YOLO Leisure & Technology (YOLO) attempts to refinance or sell TVPlayer not going well. "It is unclear at present what return may be generated for shareholders in TVPlayer in the event of a sale of its business as a going concern or any of its assets." YOLO holds 3.28%, on the books at 0.86p/sh, 13% of its NAV.
HG Capital Trust (HGT) £80m placing at nil discount.
Seeing Machines (SEE) a 'leading North American self-driving car company' buys an initial $2.2m of Guardian Backup-driver Monitoring Systems.
Dods Group (DODS) confirms press speculation re merger talks with Merit Group. Any transaction would be financed by a combination of debt and equity.
Helical (HLCL) confirms press article that it has had bid approaches. Proposals have been at a significant discount to EPRA NAV and were rejected.
Agronomics (ANIC) raising up to £4.5m at 5p, a 9% discount. Cash will be used to invest in the alternative food sector. Jim 'Mixed Fortunes' Mellon holds 29%.
Redx Pharma (REDX) H1. Still desperately seeking silver. "It is imperative that we now conclude some of these discussions."

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Howard Adams 10th Jun 4 of 30


Ideagen (LON:IDEA) have done another acquisition.

Redland is a fast growing, profitable RegTec SaaS company supplying software to the financial services industry.

Current Annual Recurring Revenue (ARR) [of Redland] is approximately £3m - an increase of 50% from April 2018.

The acquisition is immediately earnings enhancing and is expected to add mid-single digit accretion within the current financial year.

RNS is here

I have held in the past, but kept getting shaken out as Ideagen (LON:IDEA) is quite bouncy. Will continue to watch it.


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tomps3 10th Jun 5 of 30

Adding to Howard's post above.

Video: Codemasters Group (LON:CDM) results overview by Frank Sagnier, CEO and Rashid Varachia, CFO

Record results. Launched 4 titles. Signed agreement with NetEase to publish 3 titles in China. Esports partnership. Esports partnership with Motorsport Network. Expansion into mobile.

Strong schedule for games to be released. Increase in proportion of digital sales. Continued development of mobile. Increased focus on games as a service. On-going market development provide opportunities: streaming and launch of Next Gen consoles.

Also see this video: £ Investment Summary, which neatly describes franchise, the business model, the market & the opportunity.

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Howard Adams 10th Jun 6 of 30

In reply to post #482376

Hi Tamzin

Wow that was quick .....

If the sector interests you, well worth watching the video (and one Codemasters Group (LON:CDM) posted a few months ago), as they provide a useful insight into the potentials of this sector and how revenue steams are evolving.


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Paul Scott 10th Jun 7 of 30

Good morning!

I've done some sums on the update today from Scapa (LON:SCPA) (I have a long position);

Scapa (SCPA) - today's RNS says £13.0m impact from Convatec contract loss.
I can't see any updated broker forecasts yet.
My calculations:  Arden previously forecast adj PBT of £44.2m for FY 02/2020
£13.0m reduction is 29%, so new forecasts presumably will be c.£31.2m adj PBT
In EPS terms, taking 29% off previous forecast of 22.6p reduces it to 16.1p
Current share price is 164p, giving PER of 10.2 - looks good value, given that presumably future years should improve as costs cut, new orders sought, etc.
CEO being asked to stay also suggests things aren't too bad.
Could get compensation from ConvaTec, which is a large & profitable group, looking at its StockReport. Presumably ConvaTec realised they're over-paying, found a cheaper supplier, and hence reneged on the contract with Scapa? That's guesswork on my part. I can't find anything from ConvaTec on why they cancelled the contract.

I picked up some Scapa shares last week (can't resist a falling knife!), so am hoping confidence could return and take the shares up somewhat. Has always struck me as a quality outfit, so I'm hoping this might have been a good entry point?

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ACounsell 10th Jun 8 of 30

On a old subject I know but are we supposed to feel sorry for Luke Johnson following his comments regarding Patisserie Holdings (LON:CAKE) in the Sunday Times and on the BBC. No where did I see a mention of the many investors who were defrauded on his watch. What is more nothing seems to be happening with regard to criminal investigations of this involved. All is forgotten now the Woodford saga is covering multiple pages in the press!

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fredericktug 10th Jun 9 of 30

Morning Graham,

You expressed a somewhat mixed view on Triad (LON:TRD) this time last year, although you noted the potential value at 70p and the half decent stockranks.

Fast forward a year and the results seem to bear out your cautious view. The dividend is raised and net cash is up but sales and profits are well down. 

At 42p does anyone see value here, or just a struggling value trap? I mainly see PBT and EBITDA os around a million and an EV of £3m, net cash, and a dividend and whilst the outlook is cautions, I don't see a broken business. So I guess I'm seeing value.

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timarr 10th Jun 10 of 30

In reply to post #482401

What is more nothing seems to be happening with regard to criminal investigations of this involved. All is forgotten now the Woodford saga is covering multiple pages in the press!

According to the Guardian article:

The Serious Fraud Office has opened a criminal investigation but has not commented further. Johnson indicated he might be a witness in a serious criminal investigation.

If that's the case it's unlikely they'll be making statements in the public domain as it would generally be prejudicial to any future case.

I haven't seen or read the full text of the interview, but based on what I've seen there doesn't seem to be much sympathy for investors. But that's very much the professional investor view of things - caveat emptor rather than mea culpa.

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

About Graham Neary

Graham Neary

Full-time investor and independent analyst. Editor at Cube.Investments, small-cap writer at Stockopedia. Previously a fixed income analyst in the City and institutional fund manager. I'm a CFA charterholder and have the Investment Management Certificate and STA Diploma in Technical Analysis for good measure. When I'm not talking about finance, I enjoy recreational poker, chess and Mandarin Chinese. more »


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