Small Cap Value Report (24 Jan) - SAL, SDM, AVS, AKR, HRN, JDG, SSY

Friday, Jan 24 2014 by

Good morning!



Spaceandpeople (LON:SAL)

Regulars might recall that this was one of my favourite shares of 2013, and is a core holding in my long-term portfolio. I see this as a hold forever type of share, as it pays a decent dividend, is priced reasonably, and delivers reliable growth every year. It's a niche marketing company, which manages kiosks and advertising campaigns in open spaces, mainly the central parts of shopping malls, but also railway stations, garden centres, festivals, indeed anywhere there is a concentration of people and open space.

It's the market leader in this niche in both the UK and Germany, and also has smaller operations in India, Russia, and is likely to continue further overseas expansion. The company is based in Scotland, and has entrepreneurial management who are properly incentivised with relatively modest remuneration packages, but decent-sized shareholdings and share options - exactly the way it should be done - none of the disgustingly bloated pay packages that many London-based small cap Directors take.

So it ticks a lot of boxes for me as an attractive small cap niche growth company. The company has issued a positive trading update today, for calendar 2013, with the key part being this;


Gross revenue for the year increased to £36.8 million (2012: £30.1 million) and net revenue increased to £13.8 million (2012: £13.1 million) as the Company continued to expand its client base whilst delivering increased sales to its existing clients both in the UK and Germany.

Pre-tax profit for the year is anticipated to be in line with current market expectations.

Cash flow was again positive during 2013 with net cash being £1.9 million at the end of the year compared with £834k at the end of 2012.


So all looking good. What are profit expectations then? Stockopedia shows consensus forecast of 8.66p EPS - this is a fully diluted figure, as there are a lot of share options here. The basic EPS is around 10p I am told. Checking the most recent Annual Report (for 2012), note 27 (see excerpt below) states that there were 1,983,076 share options outstanding, with a weighted average exercise price of 81.1p.

There are currently 19.5m shares in issue, so…

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SpaceandPeople plc is a United Kingdom-based media specialist company. The Company is engaged in marketing and selling of promotional and retail licensing space on behalf of shopping centers and other venues throughout the United Kingdom, Germany, France and India. The Company's segments include Promotional Sales, Retail, Head Office and Other. The Company markets, sells and administers promotional space in a range of footfall venues across the United Kingdom, including shopping centers, theme parks, garden centers, retail parks and airports. The Company offers a service covering from consultancy services to the provision and management of retail merchandising units in shopping centers. It enables venues to market, administer, promote and sell their promotional space. Its subsidiaries include MacPherson & Valentine Limited, SpaceandPeople GmbH, Retail Profile Holdings Limited, POP Retail Limited, Retail Profile GmbH, SpaceandPeople India Pvt Limited and S&P+ Limited. more »

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Stadium Group plc is a provider of integrated electronic technologies. The Company operates through two divisions, including Technology Products, which incorporates wireless, interface and displays, power and stontronics, and integrated Electronic Manufacturing Services (iEMS) provided through design and manufacturing operations in the United Kingdom and Asia. It offers various services, such as design (electronic, mechanical and software), prototype, new product introduction (NPI), global procurement, in house tooling and molding, printed circuit board (PCB) assembly, box build and test, packaging and global logistics. It provides wireless machine-to-machine (M2M) connectivity solutions for original equipment manufacturer (OEM) devices in vehicle tracking, telematics, fleet management, smart metering, asset tracking, wearable technology, handheld devices, infotainment and security systems. It serves various manufacturers in the marine, aviation, medical and broadcast industries. more »

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

9 Comments on this Article show/hide all

Delpher 24th Jan '14 1 of 9

Thanks Paul for a clear and succinct analysis.

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Damian Cannon 24th Jan '14 2 of 9

I also like SAL for exactly the reasons that you mention Paul. It's interesting that a NED, Maurice Helfgott, has sold two-thirds of his holdings in the company this morning. I can't say that I take this as an important sign one way or the other but do you have any thoughts on this transaction?

Blog: Ambling Randomly
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Sully8786 24th Jan '14 3 of 9

Yes, thanks Paul.

They've just released another RNS with a non-exec selling 80,000 shares - not sure what to make of that either way TBH.

Company: Dave Sullivan - Talking Stocks
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hayashi22 24th Jan '14 4 of 9

Agree with your thoughts on Stadium. Key word is 'significantly' -think they gave that some thought before inserting. Forget 2013 it all points to a good recovery story for 2014. This has taken along time to sort out and hopefully we are back on the growth track. There is also a dividend which offers a decent yield.As you have pointed out there is not much value propositions left in the market so you may have come across one which offers good upside from depressed levels which reflect a whole heap of 'legacy' issues.

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stpalm 24th Jan '14 5 of 9

I'd say on SAL it indicates the BOD think they're fully valued. I personally like SDM they've been around for years and used to make motorcycle accessories like the Rickman bros topboxes and fairings. I see their name on all sorts of plastic mouldings for the building trade but think they have moved into higher margin stuff. dipped my toe in when they were 35p sold half on the interims at 57 and got it right for once. been agonising about buying more when they dropped back to 47ish. wish i had now! Could do well in an upturn.

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jashunter 24th Jan '14 6 of 9

Re SAL NED selling. Maurice Helfgott was a Director of Retail Profile Holdings Ltd which was acquired in 2010. Along with other main Directors of Retail Profile he sold the vast majority of SAL holding, as expected , in 2013. This is a small remaining holding. See RNS of 2nd May, 2013.

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kevanp 24th Jan '14 7 of 9


Thanks for the comments on Stadium (LON:SDM). Looks like my sort of investment.

You write of their pension deficit. The 2012 annual report shows an increased liability after tax of c.£5.5m, up from £4.8m the year before. This seems like a lot, compared to their market cap of £13.8m, but I have no experience of such matters. What is your opinion?


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Beginner 24th Jan '14 8 of 9

In reply to post #80892

I think Stadium Mouldings was a different company, based in the midlands. The Stadium name still appears on plastic products, but I think that company was taken over by a larger (now Chinese supplied) firm. Also Stadium figures may be flattered still by work they undertook for the Olympic developments and subsequent adaptions. Overall still a decent punt though

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Camtab 24th Jan '14 9 of 9


My personal view is a liability of £5.5m around 40% of the market cap is pretty significant. My understanding and I ask to be corrected if wrong, the liability is essentially a deficit. At current valuations liabilities i.e. pensions to be paid exceed the assets which pay them by £5.5m. If the company went bust then the liability would probably move to the Pensions Protection fund which was set up a few years to protect pensioners against underfunded schemes when the company goes bust. Which doesn't help the shareholder because they have probably lost their money anyway.The valuation can be misleading pension funds have suffered from poor equity returns and historically low interest rates. The liability is a pension and if interest rates rise this falls. Equally if equities rise the deficit falls as assets rise relative to liabilities. A pension deficit is given at that point in time, whereas the time line can be many years in the future. I think the key is to try and understand the time line each scheme is dealing with. Then feed in your view of long term interest rates. Then you can take a view.

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 Are LON:SAL's fundamentals sound as an investment? Find out More »

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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