Small Cap Value Report (11 Sep) - THT, SAL, APH, UBI

Wednesday, Sep 11 2013 by

Good morning! Today I shall be reviewing results from Thorntons (LON:THT), Alliance Pharma (LON:APH), and Ubisense (LON:UBI). The market has opened down a little, with the FTSE 100 currently down 15 points, at 6,577.

So, turning first to Thorntons (LON:THT), I've been sceptical this year to date about the strong rise in share price here, mainly because they still have a mountain to climb in terms of paying down a considerable amount of net debt, plus the cashflow drain that their pension deficit continues to be.

So starting with valuation, the shares are down 2p this morning so far, at 88p. With just under 68.4m shares in issue, that equates to a market cap of £60.2m. Net debt has reduced slightly, but is still considerable, reported at £27.5m on 29 Jun 2013. So that's about 40p per share in net debt to factor into the valuation. The pension deficit is a further £24.9m (down from £29.1m a year earlier), so that's another 36p per share in debt effectively.

Revenues for the 52 weeks ended 29 Jun 2013 came in up 1.8% to £221.1m, and profit before tax rose from £0.9m last time to £5.6m this time. So a good recovery, but still a pretty marginal business, only delivering a 2.5% profit margin - I can't get excited about that performance.

Cashflow generation was £8.3m, as you tend to find with retailers that they are good at generating cash, once the depreciation charge for the shops is added back. That's why the sector was so attractive to Private Equity a few years ago, as they viewed the sector as cash cows to be milked to repay the crippling debt that PE loads onto companies they acquire. Although Thorntons seem to have accumulated a fair bit of debt themselves, without any assistance from PE.

Basic EPS dropped out at 5.6p, which looks to be slightly ahead of broker consensus forecast of 5.36p, and with 6.92p forecast for the current year that puts the valuation at a PER of 15.7 times 2012/13 actual EPS, and 12.7 times 2013/14 forecast. That doesn't look cheap to me, considering there's no dividend, and in all likelihood profits for the next few years are likely to be consumed in reducing debt &…

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SpaceandPeople plc is a United Kingdom-based media specialist company. The Company is engaged in marketing and selling of promotional and retail licensing space on behalf of shopping centers and other venues throughout the United Kingdom, Germany, France and India. The Company's segments include Promotional Sales, Retail, Head Office and Other. The Company markets, sells and administers promotional space in a range of footfall venues across the United Kingdom, including shopping centers, theme parks, garden centers, retail parks and airports. The Company offers a service covering from consultancy services to the provision and management of retail merchandising units in shopping centers. It enables venues to market, administer, promote and sell their promotional space. Its subsidiaries include MacPherson & Valentine Limited, SpaceandPeople GmbH, Retail Profile Holdings Limited, POP Retail Limited, Retail Profile GmbH, SpaceandPeople India Pvt Limited and S&P+ Limited. more »

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Alliance Pharma plc is a United Kingdom-based specialty pharmaceutical company. The Company is engaged in acquisition, marketing and distribution of pharmaceutical products. The Company operates in various business areas, such as Hydromol, secondary care, community and consumer products, established products and international. The Company's therapeutic areas of focus include cardiovascular, central nervous system, child health, consumer health, dermatology, endocrinology, gastroenterology, obstetrics and gynecology, oral health, oncology, stoma care, toxicology and travel health. The Company's product categories include prescription only medicines, over the counter medications, medical devices, cosmetics and nutritional supplements. The Company's products include SkinSafe, Lift Plus, AbsorbaGel, DeoGel, LaVera, ClearWay, Gelclair, ImmuCyst 81mg, Hydromol, MacuShield, Lypsyl, Anbesol Adult Strength Gel, MolluDab and Ashton & Parsons Infants' Powders. more »

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

4 Comments on this Article show/hide all

fek47 11th Sep '13 1 of 4

How was your meeting with Spaceandpeople (LON:SAL) yesterday Paul?

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pyemckay 11th Sep '13 2 of 4

Paul, slightly off topic but was wondering if you help me understand the process of how a limit order is processed by on line brokers as opposed to a conventional broker.

By this I have an example.

the online spread of TRE is currently 18-20. nothin unusual with an illiquid share. I was quoted online to buy at 19.74p but am still baulking at it. I have put in a limit of 19.25p.

The question for me is the following.

Will the market makers be aware of my request or will the online broker just wait until the price is hit to execute without even bothering the market makers?

Great work again this week with the small cap report. Have used the search facility a few times to recap on various themes.


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cig 11th Sep '13 3 of 4

In reply to post #77130

It's quite rare for a UK retail broker to post your limit order on the market: if it was the case you would see the public ask becoming 19.25.

Apart from that, there's no fixed rule, they may do absolutely nothing (that is wait for the ask to be <= 19.25 before resending a quote request), or react to some price changes or trades, automatically or manually. I've definitely seen some of my trades take place within the spread.

You can ask your broker what they do, though if it's a big one the front line staff won't necessarily give you a correct/precise answer.

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whirly 12th Sep '13 4 of 4

In reply to post #77140

@cig @pyemckay - SelfTrade (i.e. SocGen) have a checkbox on limit orders for you to choose whether or not they are published to the market - how truthful that is I couldn't say but it would suggest they posted them at least.

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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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