Small Cap Value Report (14 Jul 2015) - JPR, RGS, DOTD

Tuesday, Jul 14 2015 by

Good morning!

No time for a preamble today, as I have to rattle through this report as quickly as possible, due to an urgent dentist appointment at 11:45 this morning - half a molar sheared off last week, but thankfully it's not (yet!) exposed the nerve, but I need to get it fixed pronto, and this was the only time they could fit me in.

Johnston Press (LON:JPR)

Share price: 119p (down 16% today)
No. shares: 105.9m
Market cap: £126.0m

Trading update - as regular readers here will know, I've been bearish on this newspaper group for years - because not only is the obvious structural decline of newspapers likely to be terminal within (say) ten years, but also because (unlike Trinity Mirror (LON:TNI) which has cleared its historic debt) JPR is still saddled with possibly insurmountable debts.

True, it refinanced in mid-2014, but the way I look at it, the investors who poured fresh equity into it were mugs, who hadn't done their sums correctly. Even after the fundraising, the last reported balance sheet (at 3 Jan 2015) shows net tangible asset value which is heavily negative, at -£314.3m if you just write off the £514.3m intangible assets, although it's possible that the £81.4m deferred tax liability might relate to intangibles, so if we write that off too, then NTAV is still negative, at -£230.8m. There could be some upside on the freehold property values, but I doubt if the fixed assets' book value of £53.3m is understated enough to close the shortfall.

The pension deficit requires recovery payments in cash of £10m in 2016, rising 3% thereafter until the final payment of £12.7m in 2024, so that's a significant drain on cashflow. Plus the considerable debt has been a large drain on cashflow, just to service the interest, let alone repay the capital.

The latest bonds were issued in May 2014, and are senior secured notes, with a coupon of 8.625%, so that's an annual interest bill of £19.4m for those, which mature in 2019 I believe. Will the company be able to cover the interest costs, the pension fund overpayments, and build up a war chest of £225m above that to repay the capital by 2019? I very much doubt it, because the core business is in terminal decline.

Today's update confirms the continued structural…

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Johnston Press plc is a United Kingdom-based local and regional multimedia organization. The Company provides news and information services to local and regional communities through its portfolio of various publications and Websites. The Company operates through two segments: Publishing (in print and online) and Contract Printing. Its portfolio contains approximately 190 paid for weekly newspapers, 10 paid for daily newspapers, 30 free titles and over 10 lifestyle magazines. It also has approximately 190 news sites and over 20 other sites, including entertainment site WOW247 and Jobstoday. Its brands include BallymenaTimes, BanbridgeLeader, Belfast News, News Letter, CarrickTimes, ColeraineTimes, Mid-Ulster Mail, Derry Journal, Sunday Journal, TyroneTimes, LarneTimes, LurganMail, Isle of Man Examiner and Yorkshire Post. Its titles span Scotland, the North East, West Yorkshire, the North West and Isle of Man, South Yorkshire, the South, Midlands and Northern Ireland. more »

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Blancco Technology Group Plc, formerly Regenersis Plc, is a provider of mobile device diagnostics and secure data erasure solutions. The Company's segments include Erasure and Diagnostics. The Erasure segment focuses on development and delivery of solutions, and includes Blancco, which provides erasure software; SafeIT, which is engaged in cloud and networked data erasure business, and Tabernus, which is engaged in providing software erasure products. The Diagnostic segment includes Xcaliber Technologies, a smartphone diagnostics software business. Its secure data erasure solutions include Blancco Management Console, Blancco Cloud, Blancco File, Blancco 5, Blancco Mobile Solutions, Enterprise Erase E800, Enterprise Erase E2400, Enterprise Erase Mobile and Ontrack Eraser Degausser. Its mobile diagnostics solutions include fault diagnostics, repair and program enablement. It serves manufacturers, financial institutions, healthcare providers and government organizations across the world. more »

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dotdigital Group Plc is a United Kingdom-based company, which is engaged in providing software as a service (SaaS) and managed services to digital marketing professionals. The Company offers dotmailer, which provides e-mail and multi-channel marketing automation platform with various tools that enable marketers to create, manage, execute and evaluate various campaigns. In addition to its automation technologies, the Company also provides multi-channel marketing consultancy and services for businesses seeking to manage customer acquisition, conversion and retention. The Company also has pre-built integrations with e-commerce platforms and customer relationship management (CRM) products, such as Magento and Salesforce. dotmailer helps in using contact data to design, test and send automated campaigns. The Company's subsidiaries include dotmailer Limited, dotsearch Europe Limited and dotmailer Inc. Through its subsidiaries, it is engaged in providing Web- and e-mail-based marketing. more »

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

18 Comments on this Article show/hide all

Beginner 14th Jul '15 1 of 18

Hi Paul
There was an interesting interview with a Johnston Press (LON:JPR) representative on Radio 4 recently. He stressed the company is actually using its existing networks and links to develop into a broader marketing and research entity. They direct broad advertising campaigns for customers, and are providers of 'big data' through visits to their websites. The info the company puts out through RNSs never seems to make this clear. On a value basis this is indeed a non-starter, but there may be some hope for the future. I hope so.

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Gostevie 14th Jul '15 2 of 18

RE Regenersis (LON:RGS), I just love the expression:

During 2016, the Board will focus on actions to maximize shareholder value.

I mean, what the duck does that mean? Surely maximising shareholder value is the primary job of any Board of Directors.

(I have no position in RGS.)

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bsharman 14th Jul '15 3 of 18

Hi Paul.

Regenersis (LON:RGS) - I was incredibly impressed when i have seen them present in the past. The CFO, Jog Dhody was/is a smooth operator but something put me off. He certainly knew how to work a room, memorising the names of investors and talking about how the share price was set to double... Well in actual fact it halved! I'm glad I steered clear of this one - if it seems to good to be true, it probably is!

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apad 14th Jul '15 4 of 18

Is there any way of checking out the stock overhang, or potential stock overhang, as a result of the director move?
This may well be the reason for the unresponsive share price.

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simoan 14th Jul '15 5 of 18

The CFO, Jog Dhody was/is a smooth operator but something put me off. He certainly knew how to work a room, memorising the names of investors and talking about how the share price was set to double.

I have a simple rule of thumb... if the management start talking about the share price, and especially talking it up with this kind of nonsense, the bargepole comes out. IMHO the best management teams never directly discuss their company share price; they understand it is a by product of how well they are doing their jobs in combination with market conditions that they cannot control. 


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Paul Scott 14th Jul '15 6 of 18

In reply to post #102929

Hi Simoan,

I 100% agree. An FD who starts trying to whip up the share price to investors is a big red flag - that was the conclusion that a group of us came to after one of the investor presentations given by Regenersis (LON:RGS) a while back.

I'm all for companies coming out to meet private investors, but if they do too much of it, and turn up at every event, then you do start wondering why. The answer is usually that they want the share price up, in advance of a Placing, and/or that they want to create some buying interest because they know there's a big seller that wants to exit (or worse still, because Directors want to cash in some options themselves!)

I've heard City advisers refer to PIs as "cannon fodder" to get the share price up! So we very much have to keep our cynical hats on, at all times.

Regards, Paul.

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bobo 14th Jul '15 7 of 18

In reply to post #102922

Good points, I used to know the company very well and they struggle to get good people to join them. As a result I doubt they have the change engines or the digestive system required to sort out the mess. Avoid

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nanotrader 14th Jul '15 8 of 18

In reply to post #102925

I had a chuckle at that too!

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janebolacha 14th Jul '15 9 of 18

Their staff don't think much of Regenersis (LON:RGS) and its management, either.

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00mrmark00 14th Jul '15 10 of 18

Anybody know where to get bond prices? I use HL as an investment platform, but it only seems to show a subset of those actually available. For example, I cant see Johnston Press which Paul refers to above.

Also tried -


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bsharman 14th Jul '15 11 of 18

In reply to post #102941

Hi, The best website i know of is the fixed income one you mention. I have also used the LSE website before.

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SingSing 14th Jul '15 12 of 18

In reply to post #102929

Great point Si, and well said..

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ericb 14th Jul '15 13 of 18

In reply to post #102940

oh come on - theres only 4 reviews there !!!

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janebolacha 14th Jul '15 14 of 18

Yes, four reviews over two years,
average grade given 1.5 out of 5,
similar remarks in each review,
not one complimentary or good review.
That is certainly not good at all, imo.
Anyway, judge it however it suits you to.

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jraitt 14th Jul '15 15 of 18

Any comments on Begbies? That used to be one of yours. Also interested that liquidations still fewer - banks still supporting zombie Companies?

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bsharman 14th Jul '15 16 of 18

In reply to post #102962

I have held Begbies Traynor (LON:BEG) on and off over the past few years. I like the potential turnaround situation based on the fact that interest rates will only increase and therefore the plug will get pulled on more zombie companies leading to growth for Begbies Traynor (LON:BEG). I would say that they are currently on a fair to modest PE, but this doesn't take into account the eventual improvement in their market. Also a big bonus is the dividend of 5%. If I had the cash to invest at the moment Begbies Traynor (LON:BEG) would be one that I'd be seriously considering again on a 2-5 year timescale (stick it away and collect the dividends)

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Laughton 14th Jul '15 17 of 18

In reply to post #102941

I think this one trades in Frankfurt - and in case it makes a difference I also think the minimum lot size is 100,000 nominal.

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Paul Scott 14th Jul '15 18 of 18

In reply to post #102967


Sorry I didn't get round to reporting on Begbies Traynor (LON:BEG) results today, due to having to go to the dentists, and then feeling a bit groggy afterwards.

I did skim read BEG results in bed, on my iPad, as usual before 8am, but didn't look impressive.
Although worth noting they've maintained the divi, so the yield is quite good.

With interest rates seemingly likely to remain low to lowish for the foreseeable future, it's difficult to see any impetus to increase corporate insolvencies any time soon.
Also finance companies are reporting record low bad debts, so again, not conducive to BEG seeing improved market conditions.

If there was some kind of massive financial shock, and say interest rates shot up to defend against a run on sterling, then BEG would be a fantastic share to load up into. Although I'm uneasy about profiting from other peoples' misery.

regards, Paul.

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 Are LON:JPR'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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