Small Cap Value Report (14 Sep 2015) - SPRP, CTG, ESCH, PHC, AGA

Monday, Sep 14 2015 by

Good morning!

Sorry to have missed lots of friends at the investor show on Saturday, I wasn't able to make it in the end. Hopefully it was an interesting day for those that did attend.

Sprue Aegis (LON:SPRP)

Share price: 340p (up 8.8% today)
No. shares: 45.6m
Market cap: £155.0m

Interim results - the figures seem to have come in as stated in their last trading update, which I reported here on 13 Jul 2015. Key figures;

Revenue £56.5m (as indicated on 13 Jul 2015)

Operating profit before share-based payments of £242k came in at £9.0m, again in line with expectations

These are fantastic numbers, with revenue being up 137% against H1 2014, and profit more than triple the prior year comparative. Striking figures indeed, although profit would have been another £6.1m higher still, at constant exchange rates.

Excitement needs to be tempered by remembering that Sprue has benefited from exceptional sales in France, driven by legislation requiring smoke alarms. The company confirms today that sales are now softening in France, so this H1 2015 period does look something of a one-off bonanza. Although the following comments today about Germany sound interesting;

Continental Europe continues to offer significant sales opportunities for the Group.  While sales into France are softening, the 10 year product replacement cycle in Germany is about to start and, in addition, two German states with approximately 10 million homes are required by law to fit smoke alarms before 31 December 2017.  German customers typically seek increased levels of product technology with wireless connectivity and, therefore, the sales value of replacement product sales is potentially significantly higher than the value of previous sales.

The narrative has further upbeat comments about product development, and possible price increases to improve margins. The full year outlook is confirmed;

Subject to no significant net adverse foreign exchange rate movements between Sterling and each of the Euro and the US Dollar, the Group is on track to deliver full year results in line with market expectations.

Broker consensus was raised after the positive trading update in Jul 2015, as you can see from the handy Stockopedia graphic below;


Given that the company has reported 16.8p diluted EPS for H1, then 21.7p for the full year seems rather low. Last time I looked, my feeling was that something nearer to 25p EPS might be more realistic for this…

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Fireangel Safety Technology Group plc, formerly Sprue Aegis plc, is engaged in the business of design, sale and marketing of smoke and carbon monoxide (CO) detectors and accessories. The Company also operates its own CO sensor manufacturing facility in Canada. The Company is also a provider of home safety products. The Company's principal products include smoke alarms and CO alarms and accessories. Sprue manufactures CO sensors for use in all its CO alarms. Sprue serves in the United Kingdom retail and the United Kingdom's fire and rescue services. The Company offers a range of brands, including FireAngel, AngelEye, Pace Sensors, First Alert, SONA, BRK and Dicon brands. The Company's subsidiaries include Sprue Safety Products Limited, which is engaged in distribution of smoke and CO alarms, and Pace Sensors Limited, which is a manufacturer of CO sensors. more »

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Christie Group plc is a provider of a portfolio of professional business services for the leisure, retail and care sectors. The Company operates through two operating segments: Professional Business Services, and Stock & Inventory Systems & Services. The Professional Business Services segment is engaged in business valuation, consultancy and agency, mortgage and insurance services, and business appraisal. The Stock & Inventory Systems & Service segment covers stock audit and counting, compliance and food safety audits and inventory preparation and valuation, hospitality and cinema software. The Company's subsidiaries include Christie & Co (Holdings) Limited, Christie Group Central Services Limited, Pinders Professional & Consultancy Services Ltd, RCC Business Mortgage Brokers Ltd, Orridge & Co Ltd, Reedwall Limited, Vennersys Ltd, Venners Ltd and Venpowa Limited. more »

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Escher Group Holdings plc, through its subsidiaries, is a provider of distributed messaging, and data management solutions and services. The Company develops, markets, sells and supports enterprise-wide software applications for post office counter automation and distributed network communication. The Company's segments include Software development and consulting services, Software licenses, Maintenance and Support. The Company provides on-premise or cloud-provided digital communications and transaction management solutions for organizations working within various transaction management environments. The Company offers Riposte, which is a messaging software. The Company's solutions include digital point of service, including postal automation, banking automation and retail automation; e-government, including document management and digital growth hubs; consumer engagement, including eMoney and Identity, and logistics, including Track & Trace, and Click & Collect. more »

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11 Comments on this Article show/hide all

Paul Scott 14th Sep '15 2 of 11

Hi dasv,

Figures today from Water Intelligence (LON:WATR) look good, I agree. It's a bit too small to include in the main article above though. Also, it perplexes me why such a tiny company based in USA, has a UK listing? Doesn't make any sense to me. The shares are horribly illiquid too - I couldn't get any when trying to buy some earlier this year, and generally I try to avoid extremely illiquid micro caps these days, as you can't get out when you need the money.

I see their shares are up 16% today though, so somebody must have tried to buy some!

Regards, Paul.

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AlanJenkins2 14th Sep '15 3 of 11

Pun unintended ? :-]

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herbie47 14th Sep '15 4 of 11

Hi Paul,

I don't know if you are still a holder of Castleton Technology (LON:CTP) but it seems they are in partnership with Capita now but no RNS which seems a bit strange to me.

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hayashi22 14th Sep '15 5 of 11

How they chuckled. Changing topics I did not rate Lord Lee's tips at Mello earlier this year. He also seemed to be punting on takeovers. Still you can't knock anyone who has got over £1m in their ISA account.
Christie was one -from memory Quarto, LoknStore, and McColls.

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imranawan 14th Sep '15 6 of 11

Hi Paul

I just wanted to check where you'd obtained the pension overpayment of £429k for Christie (LON:CTG). According to the cashflow statement £185k was paid into the pension scheme. Just curious to see where the other payment is hidden as I couldn't see it? £256k went through the P&L statement.

Disc: I don't hold shares in Christie (LON:CTG), but just want to improve my accounting knowledge.

Best wishes,

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Paul Scott 14th Sep '15 7 of 11

In reply to post #106436

Hi Imranawan,

Firstly, my apologies for getting your name wrong the other day!

Re the pension deficit for Christie (LON:CTG) I must admit to finding it difficult to work out pension scheme accounting, so I might have got this wrong. However, from note 9 in today's accounts (see below) shows the movement in the pension deficit from £13,970k at the start, to £13,728k deficit at the end of the interim period.

So it looks to me as if the company paid £743k into the pension scheme, of which £314k appears to have gone through the P&L. So I surmised that the difference between those two figures, being £429k must be the over-payment that the company is required to make into the scheme for the 6m period, so that annualises at £858k p.a.

Does that look sensible to you?

Regards, Paul.


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imranawan 14th Sep '15 8 of 11

Hi Paul

Not a problem about the name - I've been called far worse!

Yes your pension calculations seem to be sensible. I was using the pension retirement benefits in the Op cashflow (note 10) - £185k and adding back the pension scheme costs in the P&L statement (£256k) - which equated to £441k for H1 and £882k annualised.

I'm no expert, but as a ballpark our two figures are similar which is reassuring.

Best wishes,

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TMFMayn 14th Sep '15 9 of 11

RE: Christie.

I think the £185k figure is right.

Contributions paid in today's statement I believe includes employee payments, as well as payments made by the company.

In the 2014 annual report, you can reconcile the figures.

Employee contributions of £164k plus employer contributions of £1,251k = current service cost (in P&L) of £632k plus net interest cost (in P&L) of £231k plus movement in retirement benefit obligation (in cash flow statement, not charged to P&L) of £552k.

All in notes 25 and 29.

At least I think that is how it works. My rule of thumb has always been the cash flow figure (in this case £185k) is the additional pension payment not charged to the P&L.


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Whitbourne 14th Sep '15 10 of 11

Thanks Paul. Your review of Escher Group reminded me of a tweet from a few days back that made me smile:

"Mr Escher's office, please?"
"Certainly - up the stairs, keep turning right..."

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herbie47 9th Dec '15 11 of 11

In reply to post #106425

Paul I have been searching for an telephone interview you did a few months ago but I can't find it on here, would you be able to point me in right direction. It did include Water Intelligence (LON:WATR), shares are down about 20% in last few days, can't find any reason for it, maybe floods in north west England? I think you can buy them at the moment.

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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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