Small Cap Value Report (17 Apr 2014) - BLUR, STT, SAL

Thursday, Apr 17 2014 by

Good morning!




The market's doing a pretty good job of scrubbing off pockets of euphoria, and this morning it is deluded shareholders in Blur Group that have had a bucket of cold water thrown over them.

I've never really understood what this company does, nor how it comes anywhere near to justifying such a high market cap, given that it is loss-making. A trading update issued this morning has clearly put a foot wrong in some way, as the shares are down 30% to 307p. Although personally I've read the statement three times now, and don't recognise any of the figures in it. I cannot see turnover or profit mentioned at all!

The RNS says they are "reinventing commerce", which sounds very grand. It just all sounds like a fantasy world to me, which I am not visiting. In fact, I'm kicking myself for not being short of this particular share, as it was pretty obviously an over-hyped story stock with poor fundamentals, in my view.

EDIT: A reader has kindly pointed out in the comments below that there are two announcements from Blur (LON:BLUR) today, one giving various business metrics (which is the one I reported on above), but also a trading update which for some reason slipped through my net.

The company seems to have changed its revenue recognition policy, with the result that some revenues have been deferred. The key section says;


As a result, recognised revenue will be lower than expected for the 2013 financial year but with a significant value of deferred revenues relating to these projects now expected to be recognised in 2014 and beyond. Recognised revenue is expected to be in the range of $5.3 million to $5.6 million for 2013 (2012: $2.8m) with total project bookings for the same period of $22.2 million (2012: $2.4m), an +825% increase year on year. Of the remaining project bookings that carry forward, we expect the majority to be recognised revenue in 2014.  This is evidenced by the strong financial performance in Q1 2014.


I note that broker forecast for 2013 turnover is $9.9m, so reporting $5.6m is a good way below that, hence the sell-off in the shares today. Although…

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Maistro PLC, formerly blur Group plc, offers an enterprise services platform that combines cloud software and managed services, which includes sourcing, contract and project management with payment processing and reporting. The Company's segments include project revenues, which consists of the provision of services from projects that list on the Company's marketplace, where the customer accepts the bid from the expert supplier and a legally binding contract between the Company and its customers is established; cancellation fees, where the project is cancelled after listing and there is an expectation of collection; premium services, including wraparound support services for projects, including blur Manage Ultra, blur Protect Advanced and blur Engage, and subscriptions and licenses, including the provision of tiered annual subscriptions to service providers, the provision of access to the Company's software Platform and for the provision of subscriptions of blur Data. more »

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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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51 Comments on this Article show/hide all

Sully8786 17th Apr '14 32 of 51

I took e-mailed and have had a reply from the CEO - I'll update in due course.



Company: Dave Sullivan - Talking Stocks
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fek47 18th Apr '14 33 of 51

In reply to post #82752

Quite! I will be asking (quite impolitely I might add) for the Spaceandpeople (LON:SAL) Directors to reimburse the company out of their own pockets for the cost of paying Edison to produce this research note - published just days before releasing a huge profit warning.

Anyone else who's intending to vote against resolutions 4 & 5 at the AGM, see you next Thursday.

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cig 18th Apr '14 34 of 51

In reply to post #82769

They say emerging no/low margin activities (presumably because they are in build up phase) have helped replace (anticipated) revenue from the main profitable one, if you lose say 5m of (anticipated) revenue at 30% margin and gain 3.5m of revenue at 0% margin, you lose approx same in revenue and earnings. Looks odd but can be legit.

To me it looks like a teething issue. From their bios it seems the execs are adolescent entrepreneurs (in that it's their first real world venture, they worked in lala-land finance before) so it may simply be a case of hubris after a good start, probably squared when it started going wrong with thinking they could save the deals last minute (master of the universe syndrome) with then a cold shower when it downed on them (nomad ultimatum?) they couldn't keep waiting for miracles any longer. They'll eat some humble pie, which they can afford given they have a full fridge, probably learn from it and grow up good kids. (Just guessing here, I may be completely wrong.)

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Edward Croft 18th Apr '14 35 of 51

Trying to see where the red flags have been on SAL. One flag may have been that the directors have been selling consistently over the last year, NEDs, COO and Chairman. We've not released our Insider analytics yet but SAL has been scoring worse than 93% of the market on this measure. I guess some of the management may have been worried about earnings sustainability. Sorry we couldn't have flagged this earlier.

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alexdonnelly 20th Apr '14 36 of 51

I was lucky to get out on 26th March. I sell when a forecast PEG is over 1. Some times this works others not. I did not like the director sell on the 24th but it was hardly a massive sale

I always thought this was a good company to invest in with good steady profits. Kept a close eye in it with a view to re-purchase if eps growth increased and in turn reduced the PEG.

How can things go so very wrong in less than 4 weeks.

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Beginner 23rd Apr '14 37 of 51

In reply to post #82767

Hi P
Any contact made by the CEO? Anything you can share with us?

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intuitive6191 23rd Apr '14 38 of 51

Quite incredibly Space and People is still listed in the Screen of Screens and both the Peter Lynch and Philip Fisher screens. After what has happened I doubt that either would have touched this company with a bargepole.

Perhaps Stockopedia need to revisit screen criteria to stop companies that have obviously stalled still being listed in growth screens.

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Paul Scott 23rd Apr '14 39 of 51

In reply to post #82839

I'm sure the screens don't update from trading statements, just from published accounts.
However, the forward PER should adjust when broker forecasts are processed, which can take Thomson Reuters a few days, especially for smaller caps. So the SAL forward estimates should adjust correctly in the next few days.

Screens are only a way of filtering for ideas, and then each idea has to be checked for the latest trading updates, etc.


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intuitive6191 23rd Apr '14 40 of 51

Thank you Paul

Which is to say that the stocksheets (and therefore screens) can be quite out of date.

The Agriterra stocksheet took nearly three weeks to update recently. I also notice that the Quercus stocksheet seems permanently stuck in time since its profit warning in January.

Obviously if the stocksheets rely on broker upgrades - and these dont happen promptly (or at all) then relying purely on screens is very dangerous. I mention this as some posters seem to believe that the screens are the be all and end all of analysis.

Hopefully new investors will heed your good advice and make sure that they read all company announcements and manually adjust the figures on the stocksheets. I mention this as I am not sure that all investors on Stockopedia realised the time delay on stocksheets.

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purpleski 24th Apr '14 41 of 51

In reply to post #82835

He did as promised but I was in a motorway service station an then he had the AGM and then he is traveling. He is calling next Monday. I will post back here next week.

By the way you may have noticed that Paul has taken the plunge (his words not mine) and bought some more at 70p and from what he says he has a chunky investment (15% of his portfolio?) in Spaceandpeople (LON:SAL). I have done that yet but will wait and see.

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Beginner 24th Apr '14 42 of 51

In reply to post #82895

Thanks P. You are a gentleman. I must admit that I am quite impressed that he did come back to you. I would really appreciate your time (again)! when you get to talk to him again. I saw Paul's tweet, but had actually already decided to take on a few more and average down. Even with the reduced figures, the PER is about 9 and there is money in the bank and a decent profit margin.I have far too much in Spaceandpeople (LON:SAL) now, but will pare it down later (I hope!).Edisn's new note suggests the dividend will be maintained at the current level, giving a 5% yield.

On another note I see that Molins (LON:MLIN) has today announced a possible move to AIM. The reaction has not been good so far, and I can see further drops there because of that. Once it hits the 140s it will have a PER of 7, no real debt, and a pretty profitable niche business. The yield will be a nice 2.5% . Admittedly there is a massive pension defecit, but that seems to be in hand. One for the watch list? (I believe Paul took a few of these a little while back).
Thanks again

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Sully8786 24th Apr '14 43 of 51

Did anyone attend the Spaceandpeople (LON:SAL) AGM?

Any views or anything to report??



Company: Dave Sullivan - Talking Stocks
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Ardipithecus 25th Apr '14 44 of 51

I attended the AGM yesterday. After being detained on a Victoria line tube train for 20 minutes, I missed the first 10 minutes of the meeting, and so was unable to vote for the CEO Mathew Bendings re-election. After the formal agenda there was a report on the reasons for the downturn from Bending with contributions from Gregor Dunlay the FD, interrupted and followed by a very extensive Q&A session.
Too much too report all here but some of the main points were as follows.

The Board claimed that although there had been a few 'amber' warnings before the 24th march report this was normal fluctuation in sales as divisional managers reported on their budgets and nothing to be too concerned about.. The full extent of under performance only became known after the end March figures were in. Hence the profit warning. Bending said that there had been downturns in each of their operational divisions before, but there had always been compensating good progress in other divisions to mask this. This time was exceptional as every division was hit for one reason or another.

UK Promotions.
Failure of new garden centre venues to produce revenues as forecast. Bending admitted that they had been over aggressive and optimistic on this one assuming that garden centres would develop like other retail outlets. He says this will happen but several quarters later than hoped for. This was a major shortfall.
IMO they should have done better due diligence and been more cautious in budgeting for this.

UK Retail
Problems here are to do with changing requirements of venue owners. Many different changes but e.g. gold buying & mobile phone kiosks are now seen as a bit naff, but these were very profitable in past.
IMO None of these changes should be surprising but part of the normal dynamic of a company with expertise in this sector.

German Promotion
This was a major negative as planning permission has not been given for a big roll out of juice and nail bars.
IMO They knew that this was an issue before the end of March. They were obviously gambling that planning consent would come sooner.

German Retail
Slower pace of roll outs delayed contracts, slower sales.
IMO Over agressive sales forcasts and optimism.

My overall impression is that there has been no skullduggery, but a Board that has enjoyed several years of success and has grown too complacent and carried away by their own hubris. Gregor reassured us on cash flow and estimated net cash of about £1m at 2014 year end.
IMO Still a viable business and they will now obviously trying to repair the damage. Will probably take a year or two to put things right. Mr. Bending bought 6700 shares this morning!

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intuitive6191 25th Apr '14 45 of 51

In reply to post #82919

Many thanks for taking the trouble to report. My own thoughts were that this company had come very close to misleading the market and your report does nothing to change my view.

I thought of having a punt on SAL a while back but a few things put me off...

It seems that much of their business has very little competitive advantage. Many small marketing companies offer fairly much the same thing and I would guess that there is little scope to raise prices or grab market share.

I also had a look at their website and was quite surprised as it looked more like a local Government website - a bit drab and uninspiring with plenty of redundant words. Also the header tabs seem strangely out of sequence. If I was a client thinking of using them for presentation skills I would probably think twice after looking at the website.

This could well be a steady business in the future but it needs much better management IMO.

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Paul Scott 25th Apr '14 46 of 51

In reply to post #82921

Hi intuitive6191,

With respect, I don't think you've fully understood the Spaceandpeople (LON:SAL) business model, if you think they have no competitive advantage. They are actually unique, there is no competitor doing what they are doing, embedded into many large UK & German shopping centres. They manage the kiosk space in those centres, and also broker one-off promotions into multiple sites. So the only real competition is the shopping centres taking this work in-house.

The risk is centres deciding not to do any of this type of work at all. That's why SAL have to get their act together in my view, but they are clearly the only significant player in this space, hence it's entirely down to how they execute. They've obviously made some big mistakes recently, but personally I think they will probably get it back on track in due course.

Regards, Paul.

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Bouvier 25th Apr '14 47 of 51

Have to agree with intuitive6191, the Spaceandpeople website is quite poor in both presentation and detail. And the headline under the name of the company is "The leading international destination media and retail solutions specialist" which to me is completely meaningless.

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Paul Scott 25th Apr '14 48 of 51

In reply to post #82933

I've just looked at their website, and it looks fine to me.

The three large pictures with massive letters saying "Promotional Space", "Pop-Up Opportunities", and "Retail Solutions" give a blindingly obvious explanation of what the company does!!!!

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intuitive6191 25th Apr '14 49 of 51

In reply to post #82937

Hi Paul

I will respond to your points in detail over the weekend and see what you think of my thoughts. I dont think SAL is a turkey but I cant see that it is special or unique or how it generates recurring income. I am however prepared to be convinced otherwise.

Hopefully investors check out company websites before they invest? To me this is important as the design and content of the website is quite relevant as to whether I commit. Meaningless verbage and poor presentation can reflect a company which is poorly managed.

I take the view that if the management are not managing their "shop window" then they are probably not managing other aspects of the business.





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Delpher 25th Apr '14 50 of 51

It appears that SAL is acting as a property manager and therefore conditions prior to letting, such as a grant of planning permission, are fundamental to forecasting future income. Current and potential income comes from let and lettable space. SAL might be unique but it is dependent on property owners and their agents for its supply of sites. If SAL can make a profit there is no reason why the original managing agents should not do it instead and some already do. Are there binding contracts securing sites for the future and if so the what is their average length? On what basis have the indicated future earnings been made? In so far as the reasons given for the PW are concerned, on further investigation, they might amount in total to gross mismanagement brought to light by the unhappy coincidence of a series of failures during Q1 of the current year. Putting the best interpretation on the situation, but never the less inexcusable, there appears to have been a lack of understanding by the management of the weaknesses in SAL's trading position leading to shareholders being misled by their failure to make a proper evaluation of the risks prior to issuing the PR on the 24th. March resulting in many shareholders losing a lot of money.

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Sully8786 25th Apr '14 51 of 51

In reply to post #82919

Hi Ardipithecus , thanks for sharing your thoughts. It's pretty much what I was told over the phone by Matthew Bending.

It would appear that Giles Hargrave has started to reduce his position.....I thank he's sold around 200k so far. I'll be watching that space too.

I'll be sitting on this one for now - we'll see how it turns out in due course :]



Company: Dave Sullivan - Talking Stocks
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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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