Small Cap Value Report (24 Sep) - HSP, DSG, TAST, DPP, RGS

Tuesday, Sep 24 2013 by

Good morning. Lots of results today, which I will have to really belt through, as I have to be on a train for London by 10:30 this morning, for a company meeting. My diary is packed for the next 3 weeks, with in total meetings or presentations from 18 companies scheduled (some in groups, such as the ED and ShareSoc investor evenings), so it's going to be pretty manic trying to take in all of that! But it's what I enjoy doing, so bring it on! I find the more companies' management you meet, the better you get at sorting the wheat from the chaff. Or at least spotting the better risk/reward opportunities, might be a kinder way of putting it.




The company I am seeing for an analysts lunch today is £270m market cap Hargreaves Services (LON:HSP) - they operate some UK coal mines, and are a distributor of coal & coke, haulage, etc. The reason I'm interested in seeing this company is because they seem so cheap on a PER basis. At 806p the shares are indicated by Stockopedia to be on a forward PER of just 6.3, and with a 2.7% dividend yield. The Balance Sheet has some long-term debt, but it's not excessive at all, with net debt reported at £77.9m as at 31 May 2013.

Figures issued this morning are for the year ended 31 May 2013, and show turnover up a whopping 36% to £843m, and continuing underlying profit before tax up 5.9% to £52.2m. Looks like there are some one-offs due to problems at one of their colieries, but this has been known about for some time.

From a Google search, I can see that the price of coal seems to have shot up in recent years, so presumably that is driving things. Continuing underlying EPS is reported at 134.6p, with a 20.5p dividend, which both look a little ahead of expectations. I don't know anything about the coal sector, and obviously given its history of decline, have always assumed that it's moribund in the UK, but maybe not? In any case, I think most of HSP's profits come from parts of the business other than production.

If any readers have looked at this company, and understand them, then do please…

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Hargreaves Services plc is engaged in sourcing, producing, processing, handling and transporting carbon-based and other bulk materials throughout the United Kingdom and Europe. The Company's principal activities are the provision of haulage services, waste transportation, mineral import, mining and processing, together with specialist earthworks and related activities. Its segments include Coal Distribution, Industrial Services, Logistics and Specialist Earthworks. The Coal Distribution segment provides coal, coke, minerals, smokeless fuel and biomass products to a range of industrial, wholesale and public sector energy consumers. The Industrial Services segment provides contract management services to clients in materials handling and a range of other industrial sectors. The Logistics segment provides bulk logistics to customers across the United Kingdom. The Specialist Earthworks segment provides earth moving, civil engineering and infrastructure services across the United Kingdom. more »

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Dillistone Group Plc is engaged in the supply of technology solutions and services to the recruitment industry. The Company operates in two divisions: Dillistone Systems and Voyager Software. The Dillistone Systems division specializes in the supply of software and services into executive level recruitment teams. The Voyager Software division's clientele are involved in contingent recruitment, including permanent placement, contract placement and the provision of temporary staff. The Dillistone Systems division offers FileFinder Anywhere suite, which is an executive search database, customer relation management (CRM) system, research tool, report writer and project management solution. The Voyager Software division provides a range of products to all levels of the recruitment market, which include Voyager Infinity, Voyager VDQ!, Voyager Mid-Office Voyager Bureau, Virtual Voyager, Evolve and ISV FastPath. It offers its services to over 2,000 companies in approximately 60 countries. more »

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Tasty Plc is a United Kingdom-based company engaged in the operation of restaurants. The Company operates through operating restaurants segment. The Company operates in the United Kingdom. The Company operates approximately 50 restaurants, including over seven DimTs and over 40 Wildwoods and Wildwood Kitchens. The Company's restaurants are located at Plymouth, Hereford, Telford, Chichester, Taunton, Yard, Worcester, Port Solent, Brentwood, Whiteley, Kingston and Liverpool. The Company's trading subsidiary, Took Us a Long Time Limited, is engaged in the operation of restaurants. more »

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

15 Comments on this Article show/hide all

Cisk 24th Sep '13 1 of 15

Hi Paul, interesting to hear that you're meeting management today - maybe you could ask them that if they have future placings (they had one back in April), whether these will be open to private investors? The one in April was institutions only.

This really is something that needs addressing - private shareholders should be on a level playing field in terms of equity fundraising, especially when technology and costs make it no less difficult to include both institutional and private investors. Couple this with frequent share price drops in the run-up to placings being announced - Hargreaves Services (LON:HSP) share price dropped from over £9 to just under £8 in the run up to the placing, shareholders get hit with a double-whammy.

I've held these for many years, and agree with your sentiments re: the valuation of the company. The UK coal market has suffered from massive underinvestment - especially at a time when world demand is buoyant. Hargreaves Services (LON:HSP) are hoovering up assets at reasonable prices to feed their long-term supply contracts with the major power generators.

Very much looking forward to hearing your feedback. You could also ask them on their latest view on running down Maltby and any +ve asset realisations from it.



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PhilH 24th Sep '13 2 of 15

Interims for Tasty (LON:TAST) look good!

"Turnover for the 26 weeks ended 30 June 2013 was £10,979,000 (2012 - £8,868,000), a 24% increase over the corresponding period.

The operating profit, before pre-opening costs, share based payments and interest, was £1,045,000 (2012 - £752,000), a 39% increase over last year.

Basic and diluted earnings per share for the period were 1.28p and 1.25p (2012 - 0.75p and 0.74p)."

Can they look keep growing during this period of austerity? Results are weighted towards H2 so I guess christmas is going to be important for them.

40 of my former software development colleagues have just been made redundant so I'm wondering if that's a trend that's going to continue and of course that has a belt tightening effect on not only those made redundant, but those who survived and everyone who is connected to all parties.

I'm a cautious holder


Professional Services: Sunflower Counselling
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PhilH 24th Sep '13 3 of 15

Sprue Aegis (OFEX:SPRP) also have interims out reporting record turnover and operating profits.

Graham Whitworth, Chairman & Group CEO of Sprue, commented:

"The benefits of the multi-year contracts secured in 2012 are coming through in incremental sales and profit and the Group's full year results are expected to be in line with the Board's expectations"

I like this small company that appears to be punching above its weight in terms of its competitive position. It's my single largest holding and represents 10% of my total portfolio.

Lers hope it continues to post new records.


Professional Services: Sunflower Counselling
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man741 24th Sep '13 4 of 15

Reference to Hargreaves, I thought that there had been a slump in coal prices this last 2 years!

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MrM 24th Sep '13 5 of 15

Tasty - Wildwood, The Old Bear - I've eaten at their restaurant in Cobham, I just dropped in for a family lunch. It's comfortably decorated, not flashy but an easy place to relax, the food was above average and the prices reasonable. Good service from a waitress who lived locally.
I would certainly visit again.
It does have a few mixed reviews...

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corner22 24th Sep '13 6 of 15

Reference to man741's comment about Hargreaves. Yes, due to increasing worldwide production capacity, coal prices have been falling since 2008 and are expected to continue falling for the next few years.

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Paul Scott 24th Sep '13 7 of 15

In reply to post #77535


I stand corrected on coal prices - Google let me down on this occasion!
I'll ask £hsg how correlated their profits are to coal price.
It seems good to me that their profit has been rising in recent years, if coal price falling.

Cheers, Paul.

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Paul Scott 24th Sep '13 8 of 15

On a presentational issue, do readers like the border around the graphics today, or better without?

Pls vote on this comment;

Thumbs up = yes, I like borders on graphics in today's article, or

Thumbs down = no, preferred it before, with no borders on graphics.

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stpalm 24th Sep '13 9 of 15

Hi Paul, I think coal prices may vary across the world depending on demand in the region, something to chew over with them. I remember taking a look some time ago. didnt buy though

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schober 24th Sep '13 10 of 15

graphs of us coal price at

looks as though it may be cheaper today in real terms than 10y ago!
now why are we closing our coal fired power stations i wonder?

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kevanp 24th Sep '13 11 of 15

In reply to post #77537

Not sure the thumbs down is working! If it were I'd certainly be pressing it. Borders are often over-used, nearly always unnecessary, and just contribute to visual clutter (like most of the things that Microsoft have encouraged a generation of users to do in PowerPoint). Take a leaf out of Jonny Ive's book: less is more when it comes to design.

If you feel compelled to add borders, at least make them grey, to match the rules on the rest of the Stockpedia page.

But thanks for asking!

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Paul Scott 24th Sep '13 12 of 15

In reply to post #77542

Ah, that complicates things. There was me thinking the readers have spoken, but now it turns out that the electoral process has been as skewed as Robert Mugabe's last landslide victory! Ah well, never mind, am on my 2nd Peroni now, so borders, schmorders! Lol

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jraitt 24th Sep '13 13 of 15

In reply to post #77544

Don't know your schedule tomorrow but if you have a gap before ED - IOF are presenting their results to their PI's at The Grange St Pauls Hotel, 10 Godiman St, EC4V 5AJ at 2pm.
I know its a BB favourite but exciting story of massive potential and with revenue. Nice to see a Company presenting results to PI's.
cheers John

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Julianh 25th Sep '13 14 of 15

On Hargreaves:
Probably too late to feed you questions for the meeting but looking forward to your report back. Hargreaves hit two major problems this year
1. they had to close a large coal mine because of geological difficulties - the mine was flooding. A lot of investment down the drain (dropped down the mineshaft!)
2. There was a major fraud in their Belgian operations. This cost a lot too
Up to this year Hargreaves were a steady, reliable growth company with a reputation for good management. The question is whether these were two (huge) blips and they can now resume consistent growth. Or are the management accident prone in which case the low p/e is justified.
I'm probably going to hold on for now as a resumption of growth and renewed confidence would generate a major rerating. Another big problem and it'll be time to sell up
On Tasty
I've eaten quite a few times at DimT. Really nice trendy Asian restaurants. Very good food. Not cheap but popular. If the shares are as Tasty as the food I'd go for them but the p/e sounds high. I bought Prezzo a few months ago at a much more reasonable p/e and have been rewarded with circa 50% total return in a very short time

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Sully8786 26th Sep '13 15 of 15

Hi Paul,

Did you have any thoughts on HSP after meeting the management?

I've been long for a while and am around break even. Like others I was disappointed with the closed rights issue and frustrated by Maltby and the fraud in Belgium.

I'd be interested to hear if they've managed to expand their services into any other coal / power markets, although I'm guessing that Belgium, Maltby and the recent purchase of the Scottish assets has come first.....



Company: Dave Sullivan - Talking Stocks
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 Are LON:HSP'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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