Small Cap Value Report (22 Jun 2016) - DEB, HRN, MIRA, IDH

Wednesday, Jun 22 2016 by

Good morning!

Debenhams (LON:DEB) has put out an updated today. Not a small cap, but as regulars know, I keep a close eye on the retailing sector, as it's my sector specialism. It performed very well over the key Xmas season, but has now slipped back - reporting LFL sales down slightly, at -0.2% for the last 15 weeks. Sales are however still up over the last 41 weeks, at +0.7%.

The big problem retailers have, is that costs are relentlessly rising, in particular the cumulative impact of several years' rises in Living Wage will hurt. I suspect that the Government might be forced into deferring the increase in Living Wage at some point between now and 2020. It's just going to hurt businesses too much, especially in the retail, hospitality, and care sectors.

Note that Debenhams reports strong growth in online - up 9.1% over the last 41 weeks. So people are still spending, but a greater proportion is going online.

Costs are rising at just over 2% p.a., so that's the problem - if sales are not rising by a similar, or greater amount, then profit is likely to fall.

Overall though, the update says profit is in line with expectations. Note that Debenhams still has quite a lot of debt, c.£280m.

DEB is not one I currently hold, as I chucked it out in a regular portfolio pruning, a few weeks ago. Today's update doesn't motivate me to buy back in. Although the interesting thing to note with DEB is the scale of their internet sales - it's one of the UK's largest internet retailers actually.

Hornby (LON:HRN)

Share price: 31.8p (up 1.4% today)
No. shares: 55.0m before fundraising + 29.6m new shares = 84.6m
Market cap: £26.9m after fundraising

Results & fundraising - it's good to see that Hornby has managed to secure the equity funding it needed. The discount of 15% isn't anywhere near as bad as I feared. A placing has been agreed at 27p per share.

I'm delighted to see that the company and its broker have also included an open offer for existing shareholders to participate on the same terms. This is absolutely the right thing to do, so that the important issue of pre-emption rights is at least respected in part. So well done to the company & its advisers for…

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Debenhams plc is a United Kingdom-based company, which is engaged in multi-channel business. The Company’s brand trades through approximately 240 stores in 27 countries. The Company's segments are UK and International. The UK segment consists of stores in the United Kingdom and online sales to the United Kingdom addresses. The International segment consists of international franchise stores, the Company-owned stores in Denmark and the Republic of Ireland, and online sales to addresses outside the United Kingdom. The Company's stores trade under the name of Debenhams other than the Danish stores, which operate under the Magasin du Nord banner. Its stores offer customers a range of services, including restaurants and cafes, personal shopping assistance, hairdressing and beauty treatments, nail bars and wedding or celebration gift services. Its Debenhams Direct ( offers a range of products and services for online customers. more »

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Hornby Plc is a holding company. The Company is engaged in developing, designing, sourcing and distribution of hobby and interactive products. The Company distributes its products through a network of specialists through its online activities and various retailers throughout the United Kingdom and overseas. The Company has operations in the United Kingdom, the United States, Spain, Italy and the rest of Europe. The Company offers its products under various brands, such as Hornby, Scalextric, Airfix, Humbrol and Corgi. Its subsidiary, Hornby Hobbies Limited, offers products under various categories, which include Train Sets, Locomotives, Train Packs, Tracks and Extras, Wagons and Coaches, and Spares and Accessories. Its subsidiaries include Hornby Espana S.A., which is engaged in the development, design, sourcing and distribution of models, and Hornby America Inc., Hornby Italia s.r.l, Hornby France S.A.S and Hornby Deutschland GmbH, which are distributors of models. more »

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Mirada plc is engaged in the provision and support of products and services in the digital television and broadcast markets. The Company operates through the segments, including Digital TV & Broadcast and Mobile. The Company offers software for digital television platforms. Its products include Iris Client, xPlayer and Navi. Its Iris Client multi-screen solution merges traditional broadcast and over-the-top (OTT) services. Its xPlayer manages and deploys synchronized interactive content to a range of television platforms. Its xPlayer manages red and green button interactivity on behalf of a channel across satellite, digital terrestrial and cable. Its Navi is an interactive navigational solution for scalable vector graphic (SVG) browsers, built on Ericsson multi-screen middleware. Its Navi includes video on demand (VoD) and Pay-per-view (PPV) services, personal video recorder (PVR), content promotion and mini guide for linear television. Its services include development and consultancy. more »

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21 Comments on this Article show/hide all

alihaouas 22nd Jun '16 2 of 21

In reply to post #137288

paul have you looked at photome?

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simoan 22nd Jun '16 3 of 21

In reply to post #137288

I do hold some Debenhams (LON:DEB) shares. For me the key thing is the new CEO from Amazon...

To be honest, I wouldn't pay much heed to this and certainly wouldn't invest on this basis. If he introduces an Amazon-like approach to employment  contracts at Debenhams (LON:DEB) the business could just as easily be ruined as employees leave in droves. You'd need to know someone that has worked for an Amazon company to understand how totally despicable their approach to employees is, I believe they have a special  department called  "inhuman resources".

All the best, Si

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herbie47 22nd Jun '16 4 of 21

In reply to post #137306

I don't think they will do that, I was thinking more about the online retailing. But we will see I think there is potential but I only have a small holding.

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PJ0077 22nd Jun '16 5 of 21

Mirada (LON:MIRA) - an interesting one this. As Paul suggests, definitely one to do some more work on.

Today's announcement suggests a revenue opportunity of £20m for a company with a market cap of £7m.

I first witnessed the company present in the London Shares Tech Conference back in February. The key point (if my notes are correct) is that the £20m (if achieved) is a software licence fee and is recurring.

Importantly the CEO remains confident that the company will be FCF positive in the current year & hence 'no fund raising is on the horizon'.

Interview with the CEO here:

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Davidcox 22nd Jun '16 6 of 21

How sad your courage deserted you Paul. I don't think that we will let us have another referendum, ever, so I'm voting out. I don't think it's about how nice or how useful immigrants are. It's about numbers and how many the country can accommodate.and the loss of our sovereignty.

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paraic84 22nd Jun '16 7 of 21

I was an investor in MIRA but I sold after running out of patience with the fact that it doesn't seem to be able to win any new contracts (today's announcement is just a confirmation that one previously signed two years ago is now happening?). Surely if the products were that great then it would have picked up more contracts? Something to keep an eye on but the shares have been frequently diluted by placings to keep the company afloat so I've been put off.

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Velo 22nd Jun '16 8 of 21

Paul, re: your closing comments mention of immigrant car washer's etc.,. etc., Worthy sentiments we all agree with, I'm sure. (Seriously).

Personally I'm not against immigration nor want it stopped - all successful economies need immigration to continue to fuel that growth (unless you're China with excess population : )

What I am against is MASS immigration without reason, rhyme or why. We leave that decision solely to the immigrants to decide.

The country can't handle mass immigration with no end in sight.

Here's a truism - If you can't measure it - you can't manage it.

So how many hospitals, housing etc., do we need exactly in the future to meet the demand?
How much green belt do we need to dig up and concrete over to cope? Just a bit - a bit more - or a lot?
Currently we can't even get agreement on an extra airport

Do we tell  grandchildren, that if their future grandchildren choose to live in the countryside, they will have to live in a high rise tower block in order to accommodate all the population? I just don't know. Clueless, I am.

If we have no idea of the likely future long term population of this country how do we measure in readiness for the future? The Prime Minister's reassurances made years back of what the growing population will be in numbers as per the numbers arriving here, have all turned out to be wide of the mark.

I'm a reluctant Leave voter and expect to pay several thousands for the privilege of voting that, as the first threat is already on the newswires - One financial house is already stating the pound will fall by 15% if the vote is to leave on Friday morning. (Hey if they know that, perhaps they could email the PM on how many houses to build etc., They do claim to know the future, don't they?)

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timarr 22nd Jun '16 9 of 21

In reply to post #137369

The UK’s population is growing by about 1 million a year, through immigration and births netted off against deaths, which is roughly the rate we need in order to cope with an aging population: in effect the reason the population is growing is because old people are increasingly refusing to drop dead, not because of mass immigration. So whether we like it or not we have to figure out how and where to build the houses and schools and hospitals and how to train the doctors and teachers and plumbers and hod carriers; and that’s got nothing to do with immigration and everything to do with demographics.

If we need a population increase of a million people a year to create the population profile needed to ensure in 25 years that there are enough people paying taxes to keep us old farts in incontinence bags and fresh faced nurses, and our resident population resolutely refuses to produce more than 600,000 new bodies where are we going to get them from? We’ve even managed to significantly reduce teenage pregnancies, so we can’t even rely on sink estates any more. I mean, what’s the country coming to?

There are good reasons for disliking the EU, even for voting to Leave, but immigration isn’t one of them. EU immigration is governed by economics, by supply and demand and currently the demand from the UK is high. But immigration pushes peoples’ psychological buttons, it’s emotive and appeals to some of the most fundamental social constructs in our brains. So it works, but that doesn’t mean it’s true.

But if you want certainty and predictions I wouldn’t ask the Leave leadership; they don’t have a plan past 7.00 am on Friday morning. Well, other than Nigel getting pissed, Boris getting his leg over and Michael trying out a new cardigan ... but what’s new there, then?


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jonesj 22nd Jun '16 10 of 21

I don't object to moderate immigration volumes of people who will integrate and not pose a security risk.

However, volumes from within the EU are on the high side. Then we have people coming through the porous external EU borders, some of whom will present more of a security risk.  If ISIS want to smuggle people in, all they have to do is send them on a boat to Greece. Letting that happen is very stupid.

My other concerns are loss of democracy to the EU commission and our net annual contribution, which I think is about 8 billion a year. We could more usefully use that on our own infrastructure & defence, rather than building nice new roads in Poland.
There are plenty of needy infrastructure cases at home.

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Velo 22nd Jun '16 11 of 21

In reply to post #137372

The population figures you quote are based on known knowns. Fair enough but have you factored in the admission that they simply don't know the numbers coming in and have to guess?

Of more concern to me is actually having control over electing and dismissing EU bureaucrats.. Forget where I read it but one of the tests of democracy is that you should be able to ask and receive an answer to the question: How do I get rid of you?

(EDIT: Now I remember who said it - it was Naom Chomsky! And they don't come any more liberal than him on the rights of the common man, do they?)

It's so devolved from the citizen voter that it's hard to say as a citizen I have a hand in selecting them.

The EU president is selected by national leaders, so I suppose if I disagree I'd have to show that by not voting for my indigenous PM if he contributed towards electing a president I didn't want.

Once elected that president then selects 27 other members of the president's own choosing. The European parliament then has to approve that. I forget who actually constitutes the commission - the 27 members I suppose.

No wonder citizen's in member states feel distanced and powerless from the decision making reached by the EU.

Will they reform ? Cameron tried but came back without much success.

In all probability it would be hard to devise an effective replacement method to voting. But in all honesty with the present set-up can you actually say you feel you have a say in electing the President of the EU in the same way you have a hand in choosing your Prime Minister?

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IR35 22nd Jun '16 12 of 21

In reply to post #137393


You missed a bit in your appointment of the commissioners. When you say the president selects the other 27 members you missed the vital part that he(or she) selects them from the people proposed by the member states - he doesn't go looking around to find his mates in each country. All of this has to have the consent of the European Parliament.
Do you feel you have a hand in selecting our civil servants ? Isnt that a better analogy than selecting our PM?. And if the Leave vote wins and Boris becomes PM I dont feel as I have elected him despite voting Tory.

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Fegger 22nd Jun '16 13 of 21

The UK is extremely undemocratic . How do we get rid of the Queen? How do we get rid of the loads of Lords in the House of Lords? The Queen can also over ride decisions of the Supreme Court -did you know that? The Supreme Court ruled in favour of the Chagos Islanders who had been illegally removed from their home island where they had lived for generations. So the Queen signed an Order in Council that over rode this decision and no one could do anything about it and the Chagos Islanders are still fighting years later to get their island (s) back.

Our election system is also extremely undemocratic with first past he post and lots of peoples votes worth nothing and completely discarded by it. Mine was -I had no opportunity to influence the vote for the Prime Minister as I was in a Conservative dominated constituency where my vote meant nothing.

Other countries could say that the people would have more say if they left the EU but not the UK.

I feel the Eu protects a lot of my rights that the crazy right wing Tory government would take away if they could. We would soon have no human rights health and safety legislation left. Plus no public services.

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shipoffrogs 22nd Jun '16 14 of 21

In reply to post #137402

"I was in a Conservative dominated constituency where my vote meant nothing".

Presumably that would also be true if you had intended voting Conservative.

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rhomboid1 22nd Jun '16 15 of 21

In reply to post #137402

Hi Fegger

I'm not sure how..or indeed whether, to respond to your post as it appears to be a UK phobic rant rather than a reflection of how the UK actually is!

Your last paragraph just makes no sense imho , our civil liberties mainly predate the EU and are in no way dependent on them , and our public services would be far better if we could redirect our EU contributions rather than supporting a monolithic EU bureaucracy instead?

We live in a fantastic country and should recognise this , I cannot see a cogent long term argument for doing other than voting Leave, the idea that the EU backstop anything worthwhile is straining my credulity to the limit I'm afraid!

Anyway good luck to RoI ..nil nil 18m to go

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Velo 22nd Jun '16 16 of 21

In reply to post #137396

Can’t devote much time to replying - so busy I will be voting between 9:40pm and 9:59pm - that’s the only window I have on Thursday.

IR35 - Don’t let my rough breakdown of how the EU is constructed fool you. I barely know anything of its construction (mainly due to lack of direct interest). And whose fault is that? Mine?

If the EU has failed to educate me in how they work and I am now going to vote for their indirect destruction (if you read some political observers) - then that’s the result of them being so high minded they thought they could function without encouraging member states to inform their citizens of the “mysterious” construction that is the present day EU and how it issues command regulations that must be obeyed.

If my vote against them prevails then it’s because they have created me - because they took a high risk gamble in ignoring millions of people like me as they talked amongst themselves only.

So you suggest they are more a civil service than a governing body that makes the suggestions that we have to eventually live by as laws or regulations?

My response is: If I don’t like the way our civil service operates and I vote for a party that pledges to reform it - then fails to do so, then I have (potentially) the power to remove that party for failing to deliver it‘s manifesto.

How do I do that with EU commissioners/ president et al? That’s the problem I have.

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Velo 22nd Jun '16 17 of 21

In reply to post #137402

Fegger if you can ease up on nationalistic self-loathing for a mo' that "crime" against the beautiful, gentle, island people was at the behest of our real masters - the USA.

They were turfed out to let the US run a military base there. Heard on the radio they went round shooting the islanders pets after promising to take care of them. The Queen had nowt to do with it. It was a government decision using her "powers of office" just like when she desolves parliament. She doesn't decide off her own bat - she gets told to do it.

Geez - you already know that but are off on one, aren't you?

House of Lords? You'll get no argument from me - it's an anomaly that will probably be revisted when the country has the stomach to reform it - not abolish it, but reform it..

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IR35 22nd Jun '16 18 of 21

In reply to post #137414


You have a vote in our elections that choses which government represents us in Europe. You also have a vote in the EU elections.

Have you ever managed to have one of our House of Lords removed ?
Can you name a single civil servant - and how many of them do not get replaced every 5 years.

Unfortunately the EU commission and parliament get a lot of bad press. In fact Boris got fired for making up stories when he was Brussels correspondent for the Times. I really do recommend watching the video of the Liverpool University professor if you want to hear something of the working of the EU.

On the point of how to vote. I would say that if you are going to vote to make such a significant change to our situation (that really could have some serious negative consequences) it ought to be done based on a very good understanding of the issues. Unfortunately neither campaign has presented a lot of facts because they are trying to appeal to the uneducated majority who will make their decision on some soundbites.

There are still people that believe we pay £350 million per week to the EU - despite it being proven to be an outright lie.

here is the link again to the 25 minute talk:

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Velo 22nd Jun '16 19 of 21

Right I'm done, I'm off. It's the last day. See you on the other side.

If you all over rule me at the ballot box then the very personal and selfish upside to that is, that I won't lose thousands in my portfolios, which I may do if my vote caries the day.

Whatever, which parallel universe will we inhabit by end of tomorrow?

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Fegger 22nd Jun '16 20 of 21

Not anti UK but just pro decent democracy and pointing out where UK very deficient. Good result for the ROI in the footie tonight- and also they got a good result democracy wise -their President and suffrage systems work well and are democratic.

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terrylus 23rd Jun '16 21 of 21

Like IR35 I really recommend this talk from someone whose job is to study and lecture on EU law and I have sent it to many friends and many have said everyone in the U.K should watch it.

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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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