Small Cap Value Report (24 Jan 2017) - SPRP, FEVR, EMR, PZC

Tuesday, Jan 24 2017 by
53

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%)
No.…

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Disclaimer:  

All my own views. I am not regulated by the FSA. No advice.

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Sprue Aegis plc (Sprue) is engaged in the business of design, sale and marketing of smoke and carbon monoxide (CO) detectors and accessories. The Company also operates its own CO sensor manufacturing facility in Canada. The Company is also a provider of home safety products. The Company's principal products include smoke alarms and CO alarms and accessories. Sprue manufactures CO sensors for use in all its CO alarms. Sprue serves in the United Kingdom retail and the United Kingdom's fire and rescue services. The Company offers a range of brands, including FireAngel, AngelEye, Pace Sensors, First Alert, SONA, BRK and Dicon brands. The Company's subsidiaries include Sprue Safety Products Limited, which is engaged in distribution of smoke and CO alarms, and Pace Sensors Limited, which is a manufacturer of CO sensors. more »

LSE Price
191p
Change
 
Mkt Cap (£m)
87.7
P/E (fwd)
16.4
Yield (fwd)
5.2

Fevertree Drinks plc is a United Kingdom-based holding and investment company. The Company is a developer and supplier of premium mixer drinks. The Company's premium mixers consist of a range of all natural carbonated mixers, including Tonics, Ginger Ale, Ginger Beer, Bitter Lemon and Lemonades. The Company sells a range of products under the Fever-Tree brand, which include Indian Tonic Water, Naturally Light Tonic Water, Elderflower Tonic Water, Mediterranean Tonic Water, Ginger Ale, Ginger Beer, Naturally Light Ginger Beer, Bitter Lemon, Sicilian Lemonade, Lemonade, Spring Soda Water and Premium Cola. The Company caters to hotels, restaurants, bars and cafes, as well as supermarkets. The Company sells its products to a range of markets, such as the United Kingdom, Europe and North America. more »

LSE Price
1933p
Change
-2.4%
Mkt Cap (£m)
2,228
P/E (fwd)
49.8
Yield (fwd)
0.6

Empresaria Group plc is a United Kingdom-based international specialist staffing company. The Company's principal activity is the provision of staffing and recruitment services. The Company is organized across three regions: UK, Continental Europe and Rest of the World and operates across seven key sectors. The Company targets a balanced and diversified spread of operations across its regions and sectors. The Company also targets professional and specialist job levels where its brands can offer value added services to clients. The Company has three main service lines, temporary recruitment, permanent recruitment and offshore recruitment services. The Company’s offshore recruitment services represents a range of different recruitment services and provides training services in South East Asia. The Company's brands include Alternattiva, Ball and Hoolahan, Become, FastTrack and Greycoat. It has operations in 21 countries. more »

LSE Price
127.5p
Change
 
Mkt Cap (£m)
62.5
P/E (fwd)
8.6
Yield (fwd)
1.1



  Is Sprue Aegis fundamentally strong or weak? Find out More »


23 Comments on this Article show/hide all

dominic higgins 24th Jan 1 of 23
3

Paul, Graham, if you get chance I'd really appreciate your views on XLM's trading update today. Was last covered by Paul in May 2016.
Thank you
Dom

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tabhair 24th Jan 2 of 23
3

Lakehouse (LON:LAKE) also announced results which were a little less bad than I expected. I wrote about them a few months back as a possible recovery play. They own some viable businesses that are earning lower margins than competitors, which suggested to me that if the right management got involved, things could be tightened up operationally, and this could potentially do very well. I didn't buy then because the debt covenants were close to being violated, but it looks like things are maybe not so bad?

www.tabhair.com/category/lakehouse/

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ISAallowance 24th Jan 3 of 23
14

I see £BT are demonstrating today how much safer household-name blue chips are compared to AIM-listed small caps!

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About Graham N

Graham N

Full-time investor and independent analyst. Prior to this, I spent seven years in the financial markets as an analyst and institutional fund manager. I'm CFA-qualified and hold an audited, FTSE-beating investment track record.  Away from finance, my main interests are recreational poker and everything to do with China, especially Mandarin Chinese. more »

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