Small Cap Value Report (15 May 2015) - TRB, BRAM, RST, TYMN, ENTU, EPWN, IDEA, RBN

Friday, May 15 2015 by

Good morning!

London Value Investor Conference

This is the Rolls Royce of investor conferences, and I've been fortunate enough to attend for the last two years, and will be there again this year, next week in fact, Wed 20 May. There are only 6 tickets left! We've been given a special discount code: STOCKOPEDIA-LVIC  which will get you £120 off.

There are some terrific speakers, as always, including Jonathan Ruffer, Charles Brandes, Richard Oldfield, Simon Denison-Smith, David Shapiro, and the last session is Q&A with Neil Woodford. The full schedule is here

It's not cheap, but it's a real quality event in my view. I'll have my press hat on, so will be scribbling down some notes, and will publish a couple of articles here for talks which inspire me on the day. As it's a full day, that will mean unfortunately there won't be a SCVR here on Weds next week. Hopefully my reports from the LVIC will more than make up for that though.

Here is a link to my previous reports from the 2014 & 2013 LVIC, which are worth a recap. Jon Moulton's talk in particular was brilliant last year, and had a lot of relevance for those of us who like to meet management of companies in which we invest.

Anyway, on to what's happening today. It's quiet, so I'll circle back to a couple of announcements I overlooked yesterday from Ideagen (LON:IDEA) and Robinson (LON:RBN) at the end of today's report.

Tribal (LON:TRB)

Share price: 139p (down 8% today)
No. shares: 94.8m
Market Cap: £131.8m

AGM trading update - by the way, in case anyone doesn't realise this, the blue headers are clickable links to the relevant announcement. So if you right-click and select "open in new tab", then you can refer to the source document on .

Clearly this has been perceived as a mild profit warning, as the shares are down 8%, so let's have a rummage. Tribal is a "leading provider of software and services for education management" - a nice clear description of their activities in today's announcement.

Doesn't sound too bad at all;


So of course that actually means the outlook is slightly below. I guarantee to buy shares in the first company which uses…

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Tribal Group plc is a United Kingdom-based company, which provides software and services for education management. The Company's segments include Product Development and Customer Services (PD&CS), Implementation Services (IS), Professional and Business Solutions (PBS) and Quality Assurance Solutions (QAS). The PD&CS segment represents the delivery of software and subsequent maintenance and support services. The IS segment represents the activities through which it deploys and configures software for its customers. The PBS segment represents a portfolio of performance improvement tools and services, including analytics, benchmarking and transformation services, and the QAS segment represents inspection and review services, which support the assessment of educational delivery. Its products and services include license and development, implementation, maintenance, professional and business solutions, quality assurance solutions and other systems related. more »

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Rubix Group International Limited is a United Kingdom-based supplier of industrial maintenance, repair, and overhaul (MRO) products and services. The Company is a authorized distributor for branded MRO products and its portfolio includes transmission and automation, fluid power, machining, assembly, tools and protective equipment. The Company serves various industries, such as automotive, cements and aggregates, chemicals, glass, food and beverages, power and utilities, industrial engineering, metals, recycling, pulp, paper and packaging and transport. more »

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Restore plc is a United Kingdom-based support services company. The Company is engaged in providing services to offices and workplaces in the private and public sectors. It operates in two segments: Document Management and Relocation. Document management includes business streams, such asRecords Management, Restore Shred and Restore Scan. The Restore Shred offers secure shredding and recycling, and operates from over 10 sites. Restore Scan is its document scanning business, which transforms document related processes to manage customers' access to information. Relocation includes various business streams, such as Harrow Green, Relocom, IT Efficient and ITP Group. Harrow Green is engaged in the United Kingdom workplace relocations. Relocom specializes in desktop information technology and trading desk relocation, among others. IT Efficient provides secure data destruction and hardware disposal services. ITP Group collects cartridges from various premises across the United Kingdom. more »

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

20 Comments on this Article show/hide all

purpleski 15th May '15 1 of 20

I looked at the LVIC but just could not justify it based on cost (when added to all the other costs - Stockopedia, ADVFN (cancelled sub though as rubbish), magazines, FT etc) as a percentage of portfolio that I have. If that changes and for various reasons it may, I would hope to go in the future.

Have a good day and I look forward to hearing back from you.


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Velo 15th May '15 2 of 20

"...We've been given a special discount code: STOCKOPEDIA-LVIC which will get you £120 off..."

£120 off?
Cough! I had to smile at that bit. Makes you wonder what the full cost is then.

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WatsonNimrod 15th May '15 3 of 20

LVIC for me is a once every few years treat.

As PP says the quality of the speakers are outstanding.

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Gostevie 15th May '15 4 of 20

In reply to post #98775

Hi Velo,

Cough! I had to smile at that bit. Makes you wonder what the full cost is then.

£699.00 + 20% = £838.80

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Velo 15th May '15 5 of 20

In reply to post #98778

Eight - hundred - and thirty eight???


Wished you'd let me finish coughing before posting that - now it's morphed into a choking fit.

Think I'll be sticking with my collection of investment books.

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simoan 15th May '15 6 of 20

In reply to post #98781

Eight - hundred - and thirty eight???


In terms of Quality and Value, I think it's fair to say that Carmensfella's events have a much higher StockRankTM :-)


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Gostevie 15th May '15 7 of 20

In reply to post #98784

I have never been to a LVIC so cannot comment on the value for money or otherwise of an event I have never attended but I can definitely say that Carmensfella's Mello events are superb. I'd also recommend to Equity Development Investor Forums. The next one is on the 24th June:

They are free as well.


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cafcash49 15th May '15 8 of 20

I can also endorse David Stredder's Mello events. I went to the one in Peterborough and it was superb and affordable. The generosity in terms of sharing experience and expertise was brilliant.
The Share Society is also well worth joining.
Have a good day Paul and I look forward to your feedback.

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Paul Scott 15th May '15 9 of 20

In reply to post #98781

lol Velo! Yes, LVIC is very expensive, but on top of brilliant speakers you do get excellent coffee and a nice lunch. Does that help at all?!

Seriously though, it's aimed more at wealth managers & family offices, so the combined firepower of the people in the room probably runs to hundreds of billions, maybe even trillions!

I totally agree that David's Mello events are spectacularly good value for money, especially Peterborough - but all the speakers were happy to work for nothing, for the general good of the private investor community, and weren't selling anything either.

Regards, Paul.

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johnrosier 15th May '15 10 of 20

A little disappointed with Tribal's trading statement which seems a repeat of last May's so not surprised to see the initial mark down this morning or the subsequent buying interest at lower levels.

I think there is a quality business here trying to get out. In my view it won't need much good news on the contract front to get the share price moving. I think it is has built a good position in a long term growth area.

I bought a position last Monday, (should have waited until today!). I have posted my "diary entry" from Monday below:

From its beginnings as a UK company it has in recent years expanded overseas and now has regional offices in Australia, New Zealand and the United States; in 2014 30% of revenue was generated overseas. Last year it entered the university market in southern Africa, complementing its leading position in the UK and Australia. It also continued to develop its presence on North America and the Middle East and made a number of bolt-on acquisitions which so that it can deliver additional capabilities in the Asia Pacific region.


It had grown profits consistently between 2009 and 2013 before a hiccup in 2014 which caused the share price to drop, which I think has provided a good opportunity for me to gain exposure to a company which has good growth prospects and due to its business model one that should generate plenty of excess cash. Many of its contracts are multiyear and there is a significant and growing “software” component which delivers high margins and strong cash flow. So what went wrong in 2014? The first signs of potential trouble came in a trading statement last May when it said As a result of anticipated timing of some important contract closures and software installations, our profits in 2014 will show a greater weighting towards the second half of the year than in 2013.  We remain confident of the outturn for the full year.” In November it made a further announcement in which it expressed confidence in the full year but it was still clearly dependent on the timing of some new contracts. However, just before Christmas it issued the following: “Given the timing of a number of contracts, including those announced today, we now believe it unlikely that certain key milestones and completions will be achieved before our year end.  As a result, we anticipate that our profits for 2014 will be below the Board’s previous expectations.  The Board expects the benefit of these deferred contract milestones and completions will be recognised early next year, which will underpin our expectations for 2015.” This caused a drop in the share price to around the current levels before it staged a recovery up until the 2014 results which were published in March.

2014 results showed a 2% drop in revenue to £123.7m, an 8% fall in adjusted operating profits to £14.5m and adjusted earnings per share 10% lower at 11.3p. The good news, and what attracts to me this stock, was the strong cash generation, with cash conversion of 109% (cash conversion is calculated as operating cash flow from underlying operations before other cash flows and after capital expenditure, divided by adjusted operating profit.) The dividend was increased 13% to 1.8p per share. Net debt at 31st December was £11.7m compared to £14.5m at 30th June.

Why I have bought now

My argument for why it is a “buy” now is predicated on cheap valuation and the assumption that after a year of “delayed contracts” the company will return to growth in the current year. First on valuation, consensus forecasts value the shares at just 10.1x December 2015 earnings for 49.7% growth with a prospective dividend yield of 1.4% after a further 11% growth in the dividend. More importantly the shares are valued at just 10.5x free cash flow. (In 2014, despite at the earnings drop it generated operating cash flow per share of 21p, expensed 6.9p per share on capital expenditure, leaving free cash flow per share of 14.1p).

It is tempting to take the CEO’s outlook statement with a pinch of salt but I think the reasons for the slight shortfall in 2014 were genuine and that 2015 should show an improvement. “Our expectations for 2015 are unchanged.  Whilst customer procurement timelines have extended, our pipeline of new customer contracts is good, including a number of expected contracts where we are preferred supplier.  We also remain alert for opportunities to accelerate our progress.  As a result, Tribal has good potential to make further progress this year and over the medium term.”

In his statement the CEO also set out clearly its strategy objectives and performance measures:

As our strategy evolves, it is appropriate that we also evolve our targets and performance measures to ensure they align with our ambitions.  Going forward, alongside our existing financial measures which focus on profit margins, earnings per share growth and cash generation, our key performance indicators will include measures of the extent to which:

·     Software and analytics-related revenues have become increasingly pervasive in our business (we are targeting at least 80% by 2017);

·     We have a substantial and growing recurring software revenue base (we are targeting at least 30% of revenues to be recurring software revenues in nature by 2017);

·     Performance improvement tools have penetrated our software customer base (we are targeting at least 20% by 2017); and

·     We have a portfolio of international operations (we are targeting international revenues to be at least 50% of total revenues by 2017).

Earnings per share (EPS) will remain a core measure of our success in creating shareholder value.  Whilst we fell short of our aspiration to double EPS over the three year period to 31 December 2014, we have grown EPS by over 200% since 2010.  Our aspiration is to grow EPS by a further 50% over the next three years.

Shareholder list:

I am encouraged that over recent months some sensible investors have bought shares in Tribal; during March Henderson Global Investors and Majedie moved above 5% and Strategic Equity Capital above 3.0%. Strategic Equity Capital has an interesting approach; applying private equity investment techniques to public markets. They like to “buy good companies and sell when excellent” and look for an element of change in a business over a 5 year time horizon. I think I have spotted what has attracted them to this; strong cash flow, a growing software component and higher recurring revenues in what should be a long term growth market and due to last year’s hiccups, an opportunity to get in at a good valuation. (Could this become the EMIS of the education sector?)

Website: JohnsInvestmentChronicle
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kenobi 15th May '15 11 of 20

In reply to post #98788

Thanks Steve, that looks interesting both SAL and VLK on a single bill !

where are they usually ? is it an evening event ?


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Gostevie 15th May '15 12 of 20

In reply to post #98797

Hi kenobi,

SAL and VLK were at the March event, and very good it was too. The events are usually held at Fasken Martineau's offices near to Oxford Circus. They start at 5:30pm and finish at about 7:15pm followed by networking over drinks and canapés.


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carmensfella 15th May '15 13 of 20

The important thing to emphasise about my Mello events are that they are essentially run by investors, with companies selected by investors, and for investors not traders !

Most of the company presentations are done at my Beckenham event and those are totally free to attend and you simply pay for your meal and drinks direct on the night. We have a huge potentially record breaking evening coming up this Monday with the new CEO of Crawshaws CRAW coming to present and telling us all what attracted him to the role. He was headhunted and previously the head of Lidl UK so an amazing catch for CRAW and the evening is titled 'from Lidl to large' We already have 54 investors booked in for the presentation.

The dedicated Beckenham Mello website is here....

If you want to know more about Mello and what it is all about

As investors we all need to help each other and not be in isolation or it will be really tough when things get tougher. Hopefully you can see Mello as a meeting place of mutual interest investors. There are some seriously talented investors who ask very searching questions at the events. Those who think directors of companies come to present just so they can get their share price up or get interest ahead of fundraisings or to find dumb money are wrong IMO and although some companies may do fundraisings at some point into the future it is good that our investors will have had the opportunity to get to meet management and see the quality of any investment much more in depth and of course had the chance to DYOR which is very important.

Hopefully we will see a few of you on Monday evening.



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Funnymoney 15th May '15 14 of 20

Hi Paul what about a comment on Powerflute which came to me on a Google Alert for "significantly ahead of the current expectations"?


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Paul Scott 15th May '15 15 of 20

In reply to post #98808

Hi Funnymoney,

I've never really properly looked at Powerflute Oyj (LON:POWR) before, mainly because it's a Finnish company, listed on AIM, and also previous results didn't look very interesting.

However, there's no doubt today's update looks good, and they've done a big acquisition a few months ago too, so it might be worth a look.

Regards, Paul.

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Golspie 15th May '15 16 of 20


Tyman used to be Lupus Capital from which Greg Hutchings was ousted after huge losses but he got the company back. name change February 2013..

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StrollingMolby 16th May '15 17 of 20

"I guarantee to buy shares in the first company which uses the phrase "slightly below" instead of "broadly in line", as I think that would demonstrate refreshing clarity and openness."

Hi Paul, more firms than you might imagine use the 'slightly below' wording in their updates - see the link...

One such mention I notice was Mitie (LON:MTO) in its 31-March Pre-close trading update - attendees at the recent UK Investor Show will remember the mention of Mitie in the Bear session / Short Ideas, from Evil and seconded by Matt Earl.  My brief notes of Evil's pitch for this short were "safe short - Mitie. 1bn MCap, 7yrs cashflow negative. Lloyds just lent them 15-20m which keeps them going..."  The thesis as I recall was that margins are wafer thin and they are coming under enormous competitive pressure, with a rising debt pile (approx. 1/4 of market cap).

The full year results are issued this Monday so we'll see how prescient they were!

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Paul Scott 16th May '15 18 of 20

In reply to post #98820

Hi SM,

Interesting, but I note that only one small cap has used "slightly below" in the last month, from the list you supplied, and that was relating to turnover, not profit.

Whereas if you look at how often the word "broadly" is used (in nearly all cases to mean slightly below!), it's multiple times per day - link here. OK some of those are not related to trading, but plenty are.

Cheers, Paul.

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valueman 22nd May '15 19 of 20

Surprised at your view of the value of Ideagen since they generate much of their revenue on a recurring nature at very high margins and now very well spread over several industries .
I did not like them much but feel now they are a more mature business with a good management structure ,decent management shareholdings ,and a verbal vow not to issue any more shares makes me much more confident .They are v. ambitious and in a fragmented market which they intend to consolidate which sounds reasonable so long as its earnings enhancing . Just a thought.

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gus 1065 23rd Nov '15 20 of 20

Hi Paul,

Wonder if you've had any reason to look at Tyman again recently since they came out with their (OK-ish) trading statement on November 10th? In your original commentary, you commented that they looked a potentially interesting play, albeit expensive compared to Epwin and Entu in the same sector. I note the Tyman share price is now c.240p compared to the 306p in your original report.

Given their significant US interests, this might be worth re-visiting given the US economy seems to be getting its growth act together and suggestions of further USD appreciation if interests rate start to tick up from December. Also, it looks as though there's been some institutional investor buying recently - not least BlackRock and the AXA Fram UK Smaller Cos fund which has been quite successful in the past couple of years.

All the best,

Gus 1065.

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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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