Hi there,

Today brings with it too many interesting updates for me to cover them all, but I'm planning to start with:

Sprue Aegis (LON:SPRP)

Share price: 172.5p (-2%)
No. shares: 45.9m
Market cap: £79m

Trading Update (for the year ended 31 December 2016)

(this section written by Graham Neary)

As most readers will be aware, this company had a shocker in 2016, driven by a battery problem, weaker demand, and supply chain issues.

This is a mixed update which describes the company working through various challenges, as it tries to get back to normal performance levels:

Sales are expected to be approximately £57.1m (2015: £88.3m) and the operating profit* (post a £0.2m restructuring charge) is expected to be approximately £2.1m (2015: £12.8m).  The Group delivered an improved performance in the second half with an estimated H2 2016 operating profit* of £3.0m (H1 2016: operating loss of £0.9m before share based payments charge). 

That sounds like a reasonable H2 result, in the circumstances, but note that it is before share based payments of £0.6m (which increased slightly, compared to 2015).

If paying out share awards was irrelevant to the operating performance of a company, it wouldn't pay them, I think - so share awards should always be included in operating numbers like this. There is nothing special about these annual payments which means that external shareholders can simply ignore them.

So I would argue that a more meaningful operating profit figure would be £2.4 million in H2, up from a £1.4 million loss in H1.

My opinion

Looking forward, I'd like to be bullish on the company's recovery prospects. What I really need to understand is how overstocking in France led to such a large sales collapse there - was management at fault? Were lessons learned? Perhaps the annual report will help to explain.

Cash is now £14 million, leaving the enterprise value (market cap minus cash) at £65 million. Further business recovery is due, and will be needed to justify this valuation.

Fevertree Drinks (LON:FEVR)

Share price: 1190p (+5%)

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