Small Cap Value Report (21 Apr 2016) - UCG, LAKE, CNS, TRK, MPM

A lovely start to the day Paul. Thank you.
Your maps highlight something that has been nagging at me for a while with regard to your recent comments on the retail sector. I live in the Grim North. We are effectively still in recession. There has been no recovery here. Many quoted UK retailers are regionally confined. WM Morrison Supermarkets (LON:MRW) is probably the best example, but the same can be said of Fishing Republic (LON:FISH) and Crawshaw (LON:CRAW) , as well as United Carpets (LON:UCG) and Conviviality (LON:CVR) . All these seem to have had a decent run of late, but I can see a distinct opportunity for regression in the near future.
I think retail figures released today suggest something of a slowdown across the UK, perhaps giving a hint at what may be to come.

I see the CEO of Lakehouse (LON:LAKE) has resigned. I think this was inevitable after the recent boardroom shenanigans. I guess his position become untenable to some extent.

Beginner, I think you will find that, after its ill-judged acquisition of Safeway, MRW is not more focused on the North than any of its main rivals.

Ucg divi was 0.25p in october 15 Paul, more to come our way though!

UCG looks interesting, although as Paul points out director pay may be a bit high

But notice that one of the non-execs is a PA Cowgill, who was a director of MBL a while back, a company that tanked completely and lost me a lot, so its a no-no from me!

In reply to post #128648

MBL were reliant on a single large contract, was there much Cowgill could have done? On the other hand, he has been exec Chair at JD where he has made investors a ton of money. Can't win them all!!

Seeing as JD just got a mention, what do people think of them? Last weeks results looked superb as far as I could tell, they seem to be trading really well... where as SPD, in a similar market, is currently dishing out poor trading news and controversial finance arrangements with childish spats in their announcements.

Very useful that you singled out tiny free float, director's excessive remuneration and difficulty in trading, which qualify the high ranking and illustrates why good ranking can mask skeletons in the cupboard.

Paul, I see Gama Aviation (LON:GMAA) final results are out today, on the face of it they do look good, Rev up 15%, G. Profit up 27.6%, Profit Margin +11%, but there are one of costs due to the merger last year, a lot of EBITDA and adjustments. Strip out the one off costs then the figures look very good unless I'm missing something? It is rather complicated, I don't think the presentation has helped. Shares are only up slightly.

In reply to post #128627

They have expanded in the south, I know they took over some Somerfield stores when the Co-op took them over. In fact my nearest town has 2 Morrisons but no Sainsburys.

Regarding GMAA I wonder whether the following comments are a worry made relative to their strong US operations?

...in Europe the outlook is very different. We expect the gradual softening of the market which has been evident over the past twelve months to continue well into 2016. With a cautious economic outlook and the various political uncertainties, the trading environment remains challenging and consequently organic growth within our European operations will be at a premium, particularly in our Air operations....

Our Middle East operations continue to make steady but slow progress.

Lakehouse - I would not be surprised if the FD were to move on as well, although hopefully not imminently. Hopefully we will not see the scenario where the incoming CEO puts through a few p&l write offs / provisions as part of a tidying up exercise. Not an uncommon practice especially if you are also in discussions about the strike price for any share options.

Waterman - any thoughts on this given that the share price is moving solidly sideways / more down than up?

In reply to post #128678

Hi Gaustin,

That was my thought too on Lakehouse (LON:LAKE) - new CEO coming in, so probably some kitchen-sinking to be done with the accounts, to discredit old management, and give himself a nice springboard to produce better figures later on, aided by releasing provisions made in the kitchen-sinking. Or are we being too cynical?!

Waterman (LON:WTM) - there hasn't been any material news since the interims on 29 Feb 2016. So there's nothing for me to report on. I generally try not to get into chatter about share price movements, as it's a waste of time really. Prices just go up & down in the normal course of things.

Regards, Paul.

Ref: Torotrak
If their KERS system cannot work on a bus, then where can it possibly work ? With all the stop-start & a plenty of space to package the system, service buses must be ideal.
Now of course, they were trying to combine the Flybrid flywheel energy storage system with their Torotrak CVT.
Generally, when there are competing electrical and mechanical solutions, the cost of the electrical one falls and it becomes the dominant technology. Battery hybrids already have a big lead in the market. Then if someone makes a big step forward with batteries, Flybrid would be even less competitive. That is a risk.

Does this mean their Flybrind acquisition in 2014 may not earn a return either ?

In reply to post #128681

Although I am not a fan of verbing (making a verb out of a noun or two), I do make an exception for "kitchen-sinking" which Gaustin took a whole sentence to describe.

Kitchen-sinking. We all know it now. Should be worth a chapter in that book on accounting that Paul is going to write.

Today's price rise in UCG takes them above £10M market cap so that might put them on the radar more for some investors, large and small. Interesting that both UCG and SCS should report good market conditions ... this fits with my feeling that with a lack of property for sale, people are spending money doing up their existing properties.

In reply to post #128651

You are probably right and its just my bias from losing most of my investment
although I seem to recall the MBL Board were also on considerable remuneration for a smaller company?

In reply to post #128681

Lakehouse - downside protection may come from the fact that the Slater fund will probably be quite instrumental in who is appointed protecting their investment position. These may have an impact on how much, if any, kitchen sinking is done. Disclosures of any buying or selling by Slater will say a lot.

In reply to post #128729

Slater and Rawlings both have a long term view. Kitchen sinking likely to be better for that than a risk of further disappointments.

The whopping director's swill-trough would make united carpets uninvestable for me. What, running off with nearly 50% of the profits!! well-pointed-out, Paul.