Small Cap Value Report (19 Jun 2015) - STY, CRL, DAN

Friday, Jun 19 2015 by

Good morning!

In case you're interested, and missed it, I recorded a SCVR Extra video last night, covering 8 more companies that I didn't have time to type up during the day. There are clickable links in the description box which allow you to jump straight to companies of interest, if you don't want to watch the whole thing (which is under 14 mins).

It's very quiet today in my area of the market, with hardly any results or trading statements for small caps.

Styles and Wood (LON:STY)

Results for y/e 31 Dec 2014 - this is a property services company. The results look good - turnover is up 3.2% to £97m, and underlying profit before tax is up 200% to £2.1m. The order book is up 20% too. The market cap last night was only £3.7m last night.

So clearly there's a catch! It's the balance sheet - the company has an inappropriate capital structure, with far too much debt, in the form of convertible preference shares.

Refinancing - however, in a separate announcement, the company gives details of a clever refinancing which gets rid of more than half of the convertibles. It took me a little while to work through the details of the refinancing, to get my head round it, as it's not a simple deal.

By the time I realised that this is a very good deal, that puts the company on a much firmer footing, it was too late, and the shares had already shot up over 40%.

Anyway, as it's a real micro cap, or even a nano cap, I won't waste any more time on it, as most readers won't be interested.

Creightons (LON:CRL)

Results for the year ended 31 Mar 2015 - another nano cap, so again just a very quick mention. Underlying operating profit was flat against last year at £0.5m, but an exceptional gain was made on a disposal, of £375k.

Interestingly, another disposal after the year end bagged another £1.0m, of which £844k is profit. The balance sheet is in good condition, especially when you include the post year-end disposal boost.

Although the narrative refers to margins being squeezed by customers, and revenue investment being made. So it doesn't look likely that underlying profits have much scope to go up, from my very quick review…

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Styles & Wood Group plc is a holding company engaged in providing property services to banking and finance, retail and leisure, commercial and public sector organizations. The Company's segments include Professional Services and Contracting Services. The Professional Services segment includes portfolio services, such as program services, which creates roll-out programs for framework customers; design, which provides design and development services, and big data integration and analytics, which provides technology-based property information solutions. It also offers program management and implementation, which works with clients to develop, scope and implement programs. Its program services include activity scheduling, project management and control, life cycle modeling and workload planning, change and risk management, and data capture and generation of management information. The Contracting Services segment includes projects. It offers iSite Portal, HUB and iGO mobile solutions. more »

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Creightons plc is engaged in the development, marketing and manufacture of toiletries and fragrances. The Company operates through three business streams: private label business, contract manufacturing business and branded business. Its private label business focuses on private label products for high street retailers and supermarket chains. Its contract manufacturing business develops and manufactures products on behalf of third party brand owners. Its branded business develops, markets, sells and distributes products it has developed and owns the rights to. Its product portfolio includes bath and shower care, haircare, body care, baby and maternity, and fragrances, among others. Its services include market analysis, creative concept generation, product development, brand development, manufacturing and logistics. Its brands include Frizz No More, Volume Pro, Argan Body, Argan Smooth, Keratin Pro, Perfect Hair, Bronze Ambition, Sunshine Blonde, Beautiful Brunette and Just Hair. more »

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

9 Comments on this Article show/hide all

bsharman 19th Jun '15 1 of 9

Hi Paul. I was going to put out a request for you to talk about Styles and Wood (LON:STY) - so I'm interested! I bought these a long time ago when I knew absolutely nothing about investing and have held them ever since. I don't really understand the details and full implications of the announcement today - conversion of pref shares, but it does seem like good news and the market has reacted very positively! Anyway I still have some way to go before breaking even... but it was such a long time ago and I had almost forgotten that I hold them, so it's nice to see something happening which is positive as I refuse to write this one off as a loss... lol.

In other news, did you see that Gervais Williams has increased his holding in Norcros (LON:NXR) to 12%. This i feel can only be positive, as he is highly rated as a small cap investor!

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Gostevie 19th Jun '15 2 of 9

Hello Paul,

Thanks as always for these fascinating SCVRs.

I watched a presentation by Creightons (LON:CRL) at Mello 2014 in Peterborough and although it was more sales than investment based I was impressed enough to buy a small holding for my SIPP. Whilst I was there I also picked up a copy of their 2014 Strategic Review, which includes this statement which is not something I have come across before:

The Board is at the same time considering using its existing powers to establishing an “employee shareholder scheme” as a separate incentive scheme for Group employees. “Employee shareholder” status was introduced by Government last year. An employee who agrees to become an employee shareholder and is given fully paid up shares in the Company (paid up by the Company) worth at least £2,000 would surrender any future right to a statutory redundancy payment from his or her employer on redundancy, and any future right to claim compensation in most cases of unfair dismissal.

Not strictly an investment issue but I do find it slightly morally dubious that a company can 'buy out' its employees' future claims to any future redundancy or unfair dismissal claims for as little as £2,000 in shares. Apart from anything else, if such a small company was having to make staff redundant in any significant numbers it would probably mean that it was in trouble and the shares would be worth a lot less than the price at which they were granted to those employees anyway.

Not trying to make any judgement here, and I don't know if Creightons did ever introduce such a scheme (note they only said they were considering it) but I did think it was unusual enough to be worth flagging up.


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brucepackard 19th Jun '15 3 of 9

Wow - Daniel Stewart had passed me by.
I suppose you could justify it if you thought the company was going bust, and this was priced in at 0.25p. And then suddenly it isn't going bust and is worth something. But I think your explanation is much more likely!
I have had some thoughts on investing in companies with weak balance sheets, and think that at the right point in the cycle (ie during a recession) this could be quite lucrative, if you do it probalistically.
TBC I agree with your barge pole list though at this point in the cycle!

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00mrmark00 19th Jun '15 4 of 9

Hi Paul,

Any thoughts on the Fyffes trading update?

Many thanks, Mark

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janebolacha 19th Jun '15 5 of 9

Paul, I just noticed this in today`s "Alphaville Live":


…. Speaking of, do read this excellent report from Claer Barrett and Kate Burgess.

nearly three quarters of the companies to have listed on the junior market have been lossmaking


Over the past two decades, close to 3,000 companies have listed on Aim, but 72 per cent of them have never produced a return for investors, according to professors Elroy Dimson and Paul Marsh of London Business School. Worse still, nearly one in three Aim companies have resulted in shareholders losing 95 per cent or more of their initial investment.


A finding backed up by my own rather more back-of-envelope methodology: http://ftalphavill…market-in-numbers/

Happy birthday, Aim."

Happy for some, perhaps!

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LifeOfRiley 19th Jun '15 6 of 9

Hi Paul,

I was hoping you might have covered Rurelec (RUR) in your report - their results came out today.

Any chance of covering them ??


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Mark Carter 20th Jun '15 7 of 9

Paul, I think the bargepole spreadsheet is a great idea. It gives less experienced investors like me a reality check on what not to invest in.

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Paul Scott 20th Jun '15 8 of 9

In reply to post #101392

Hi LoR,

I don't normally report on overseas companies listed on AIM, because there's usually something wrong with most of them.

As with most similar companies on AIM, Rurelec (LON:RUR) has been a disaster for investors. It seems to operate power stations in S.America. I avoid everything in S.America, due to currency issues, political instability, etc.

I think a really disciplined approach is needed with small caps, to avoid entire areas - probably the most important areas to avoid, if you want decent returns, are: (1) overseas companies on AIM, and (2) the junior resource sector. Both of these have proven to be investor graveyards, and my returns are much better when I completely steer clear of those areas.

Regards, Paul.

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Paul Scott 20th Jun '15 9 of 9

In reply to post #101423

Hi Mark,

Glad you find my Bargepole List useful.

I should emphasise that it is a list of high risk and/or overvalued stocks. It doesn't necessarily follow that those shares will all go down. Some could turn out to be multibaggers, if the company survives & prospers. But many on the list are absolute basket cases, so it has developed a good track record for flagging up shares that are extremely risky and will have a high likelihood of being poor investments.

Regards, Paul.

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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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