Small Cap Value Report (25 Aug) - PFG, CCC, BOOT, ITM, WYG

25th Aug '17 by Graham Neary

61 comments 22330 reads

Happy Friday!

Today I'm thinking of writing about the final results from ITM Power (LON:ITM), the management update at Provident Financial (LON:PFG), and the half-year report at Camellia (LON:CAM). Let me know if you'd like me to write about something else, too!

Cheers,

Graham

Provident Financial (LON:PFG)

Share price: 908.75p (+21%)
No. of shares: 148.2 million
Market cap: £1,346 million

Consumer Credit Division Management Update

A huge boost in the market cap today for this troubled lender, though of course the share price remains significantly below its pre-profit warning levels.

The CEO had already walked the plank, and now the MD of the home credit division leaves too, being replaced by a returning former MD of the entire consumer credit division (CCD).

Perhaps this will herald a switch back to the former model of self-employed agents? No matter what course of action is taken, the disruption to collection agents is likely to continue in the short-term. But returning to a manager from the good times suggests to me that Provident might go back to the business model that was working rather well up until recently.

It's an interesting special situation, since the non-home credit division parts look rather valuable and difficult to replicate (I'm thinking particularly of the bank when I say that). So even if the home credit division is worthless now, as estimated by JP Morgan, the shares are still potentially interesting.

Computacenter (LON:CCC)

Share price: 999.25p (+13%)
No. of shares: 122.7 million
Market cap: £1,226 million

Half-year report

This is (strictly speaking) outside our remit here at SCVR, but in response to requests I will say a few words on it!

Also, it's a nice change to talk about shares going up from time to time.

Computacenter provides a fairly wide range of IT/computer services for businesses: security, data storage, networks, etc.

We haven't covered it in the Small Cap Value Report before (for obvious reasons) but Ed included it in his Top Stocks for 2017 (see here) thanks to a StockRank at the time of 96, and indeed it's been in his list of top stocks since…

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Graham Neary

25th Aug '17

sorry I didn't get around to that today larksrise!

clouds

Thanks Graham.

luckym

For information dgold, Halifax deduct 30% withholding tax on my Somero Enterprises Inc (LON:SOM) shares and they have my W8-BEN form. They say (for the reason I gave) that none of this can be reclaimed. I hold the shares in an ISA account. I'm not losing a fortune but it's the principle involved, and so I'll have another go at them!

ridavies

I havent been paid at all as far as I am aware, I hold my shares with Interactive Investors. Am I missing something?; 1. how to get paid, and 2. how to maximize my payment by completing some form or another? Thanks for help from anyone.

Sorry I am referring to Somero Enterprises Inc (LON:SOM) re dividend payments.

Lion Tamer

Hi ridavies

Yes, depending when you purchased your holding you should have received something. See the announcement here: http://www.stockopedia.com/sha...

"... the Board is pleased to announce that it will be distributing $7.5m in the form of a special dividend representing a special dividend per share of $0.133 (the "Special Dividend")."
"... The Special Dividend will be paid on 14 August 2017 to shareholders on the register as at 28 July 2017."

It might be worth asking Interactive Investors about it.

back2value

If "ComputerCentre" was able to spell correctly, i might consider investing. This may well be a self-defeating prejudice, I know, but the name irritates me no end.

B2V

Rusty2

You need to check your account, usually there is an income or cash section, it's probably sitting in there waiting for you to transfer it. You could check your account settings as well. I don't use II so I don't know their exact set-up. Yes you need to complete a W8BEN form so you pay less tax, this will cover all US shares that you hold with that broker, not just Somero Enterprises Inc (LON:SOM).

drvodkaquickstep

It's interesting reading Graham's comments and experience with respect to investing in Consultancy businesses as my experience couldn't have been more different having multi-bagged on WS Atkins (LON:ATK), Waterman (LON:WTM) and Sweett (LON:CSG) although it helps that I know this sector pretty well.

Investors should be aware that WYG (LON:WYG) were founded in 1959 and are not some fly-by-night Management Consultancy with a short track record. That said until the recent change in management I avoided them as I felt the previous mgt were greedy with a ridiculous 'incentive' scheme a few years back that showed their true colours.

By contrast the new CEO comes from the well respected WS Atkins (LON:ATK) stable where he managed a larger business than the the current WYG and I perceive him as a safe pair of hands.

WYG (LON:WYG) is arguably worth significantly more (2-3 x) the current mcap and has a very low chance of delinquency and today's mark-down allowed me to more than double my original holding in the 55-57p range. Clearly this needs some patience to play out but as per most other small listed Consultants it's likely only a matter of time before they get snapped up by a foreign buyer.

jules2k6

Thanks for your comments and insight Graham.
Interesting details about Somero and US withholding tax in various accounts. I never knew you might need a w8ben for an AIM stock or that there was no US withholding TAX in a SIPP.

gsbmba99

26th Aug '17

FWIW, I have a Halifax account (including ISA). I've had many interactions with Halifax since I became a customer a couple of years ago and have yet to interact with anyone I would consider competent. Halifax also incorrectly withheld 30% from an ISA holding but refunded the difference when confronted. That was, however, an NYSE listed share and the dividend probably didn't settle through CREST.

My experience suggests Halifax frequently give incorrect answers and are belligerent in defending their position even when confronted with the evidence to the contrary. As an example, I wanted to sell some NYSE listed shares that had transferred into the account. Halifax blocked me from trading the shares saying that I had to enter into an NYSE customer agreement before being able to sell the shares. This wasn't true. The customer agreement is required the first time you buy shares on the NYSE not when you sell. After much back and forth, they ultimately conceded that I was correct and the problem was on their end because their system isn't intelligent enough to distinguish between a buy and a sell order.

If other brokers are able to withhold the correct amount from a CREST settled dividend from a US company in an ISA, then this could be another instance where Halifax are giving incorrect information to cover for a system inadequacy.

Howard Adams

Hi

If you are with HL and try to buy a US stock they push you to complete a W8BEN before you buy your first US holding. That is the service levels any platform ought to offer.

They also do this with what they deem to be complex holdings such as Phoenix Spree Deutschland (LON:PSDL).

Regards Howard

Sounds like you should switch brokers or at least next year get a different broker for your ISA, Halifax does not seem that much cheaper.

I think the assessment of which broker to choose depends on whether you have fund holdings. I have not insignificant fund holdings and Halifax don't charge the obscene "custody" fees of 0.25-0.35% other platforms like Fidelity and HL do. In fact, they don't charge me anything at all for holding funds but I do pay £12.50 to trade a fund holding. With Halifax, I capture nearly all of the 0.5% reduction in OCF across all of my fund holdings post RDR. I also (usually) get access to institutional class fund shares (which can generate an additional up to 0.15% savings on OCF) because Halifax have a wholesale bundling agreement with Cofunds.

Financially, I am much better off at Halifax. But, as you observed, there is a price to pay. I have an account with HL and haven't found them any better than Halifax. Fidelity were exceptionally good but their charging structure doesn't work for me. If others have good experiences with brokers that don't charge for holding funds, I'm certainly willing to investigate.

28th Aug '17

I don't really understand, you list a whole load of problems you have had with Halifax and then say HL is no better, I have not experienced any of those problems with HL. Yes their charges are probably a bit higher but their customer service seems better and I rarely have any problems. The thing I don't like with HL is their high Forex charge of 1.5%. I suggest having HL account for your US shares and Halifax for your funds.

Bushranger

My broker is TD which has for a short while now been owned by Interactive Investor. My Somero Enterprises Inc (LON:SOM). dividend and all companies dividends that are paid in US dollars are given as US dollars. As herbie47 states, these funds are held in a cash section and further obscured because I have to change my currency to US dollars to see the amount held as that currency. I had to fill out a W8-BEN form before I could by Somero Enterprises Inc (LON:SOM). I only have 15% of my dividend taken in tax so I don't understand why some brokers say the full 30% has to be witheld?

FREng

29th Aug '17

I have a SIPP with TD, administered by A J Bell. TD is now owned by Interactive Investors. I received the full Somero Enterprises Inc (LON:SOM) dividend with no tax withheld.

My view that HL aren't any better than Halifax is based solely on my own experience. I lodged two complaints with HL. HL were incredibly dismissive of both of my complaints, refused to take any responsibility and offered nothing. I took both complaints to the Financial Ombudsman who decided in my favour in both cases and awarded restitution and compensation in both cases.

Maybe I am just unlucky. Maybe I just have unusually high expectations. I'm not sure.

johnsmith68

4th Oct '17

Hi Lion Tamer.

I also hold Somero in a Halifax ISA and I contacted them after your post because I saw they had withheld 30% on my Somero divis.

Their unhelpful answer was as follows:

1. Regarding the reduction in withholding tax we do not have a specific document to state this stock is restricted from withholding tax. This does not apply as the stock settles though our CREST system the UK settlement system. If you visit our terms and conditions and search under tax. I regret we are unable to offer tax advice as we are an execution only broker.
2. Withholding tax is deducted at source, so the company that pays the dividend will be responsible.
3. The stock held does settle through crest and not a US market. We do not offer the facility to register the W8 Ben forms on US stocks held through crest, this is a business decision.

I would be interested to know if anybody has had any success in getting the withheld tax back?

Hi johnsmith68

I don't know about the Halifax as I don't use them. However having now read up some more on W8BEN, my understanding is that it can not be used retrospectively (to claim a rebate for payments before you filled in the W8BEN), If I were you I'd submit a W8BEN to your broker in any case, this is what I've now done for each of the brokers I use. Once you have sent this I suspect you'll be in a better position to make a case next time a dividend is due. I'm waiting to see what happens next time round.

Maybe someone else knows more specifically about the Halifax.

Best of luck

Small Cap Value Report (25 Aug) - PFG, CCC, BOOT, ITM, WYG

Provident Financial (LON:PFG)

Computacenter (LON:CCC)

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Graham Neary

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