Small Cap Value Report (26 Jul 2016) - CLL, SDY, VLX, VCP | Paul Scott

26th Jul '16 by Paul Scott

28 comments 18066 reads

Good morning!

I hope you didn't miss me too much yesterday.

Cello (LON:CLL)

Share price: 97.6p (up 0.1% today)
No. shares: 86.6m
Market cap: £84.5m

Pre-close trading statement - this covers the 6 months to 30 Jun 2016.

This statement is ideally laid out - a brief description of the business first. Then a clear, and simple paragraph giving a summary. Then more detail below, for those who have the time & wish to read it. When we have lots of RNSs to read in just an hour, between 7-8 am, it's very useful when companies issue concise, and clear updates like this.

The Group has had a good first half, with robust performances from the core of Cello Health and from Cello Signal. Accordingly, the Board remains confident that the Group will deliver a strong full year result in line with current expectations.

More detail is given, concerning one division (consumer consulting) which is not performing very well, but this has been absorbed by better performances elsewhere within the group. Cost-cutting has been done, resulting in a £0.6m one-off charge.

Outlook - sounds fairly upbeat to me, and note the robust Brexit-related comment below;

The Group has delivered a good underlying first half, and the Board expects this to continue in the second half.

Whilst profits in the first half will be flat on the prior year as a result of the decline of the consumer consulting unit of Cello Health, overall revenue growth has nevertheless been good.

There has been no noticeable impact on client spending behaviour as a result of the EU referendum vote and income pipelines remain robust.

The Group will also continue to benefit from a stronger dollar in the second half if the dollar / sterling rate remains at current levels. The Board remains confident that the Group will deliver a strong full year result in line with current expectations.

My opinion - the big quandary at the moment is whether or not the UK economy is likely to go into recession? We've had very poor recent PMI data, which correlates closely with GDP. However, most companies that I've looked at are saying that it's broadly business as usual.

Also, a key question to ask with every company now, is what the geographic split of business is. A heavy UK weighting could be risky. Whereas a heavy overseas weighting…

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truegent

26th Jul '16

i dont suppose Fevertree Drinks (LON:FEVR) is worth a mention Paul ? granted, very high p/e but accounts are amazing and there just doesnt seem to be any sign of growth slowing.

Ramridge

Re, Victoria (LON:VCP) It is not often that a financial report makes me sit up and say "wow". Today's FY report from VCP is one. The Chairman Geoffrey Wilding starts his statement as follows.

"A good plan violently executed today, is better than a perfect plan next week"
- General George Patton

All - or at least most - management teams have a written business plan. Most seem to run to many pages complete with indexes, appendices, lots of colourful charts, flow diagrams, and financial projections - purporting to be accurate to two decimal places - from now until the end of time. Victoria's business plan isn't anywhere near so grand; it fits on a single piece of A4 paper. I wouldn't want to claim it is the most brilliant business plan ever devised but it is simple, clear - and wholly focussed on the mission: "To create wealth for shareholders". Most importantly, it seems to work and the main reason for this is execution.

I have been eyeing this company for a while but just could not and cannot find a good entry point. Very annoying.

Re. Lakehouse (LON:LAKE)

Yesterday's RNS announcing the death of Steven Rawlings, founder and director of Lakehouse is sad news. He put a tremendous fight to save his company and it looks very much like he has succeeded with the appointment of a proven, hard-hitting new Chairman.

Sincere condolences to his family from all PI s.

Rusty2

The biggest shareholder by far is somebody called Geoffrey Wilding.

The increase in debt could be a concern if there is a recession.

rmillaree

Ref Speedy - SDY

Bye old Bod Hello new Bod = New Kitchen Sink?? - lets hope they have plenty spare for hire or use internally as is appropriate.

gus 1065

Hi Herbie,

I recall there is a story behind GW's substantial holding at Victoria. I can't remember the detail (probably worth a quick Google but am in transit at the moment) but I think it involved him coming into the company when it was a middling, lowly rated family company on the promise of a substantial LTIP that he was able to trigger through a rapid acquisition spree funded through high levels of debt. There was then a falling out with the family and a messy law suit that was resolved in July 2014 resulting in Wilding securing much of his current substantial holding for a song. Seems to have a bit of an odour to it but can't argue with the share price performance over the past few years or indeed today's results.

Gus.

hayashi22

There is something not quite right about VCP. I have generally found that when companies are making numerous acquisitions it is difficult to follow the level of underlying organic growth. Can't believe the vendors of the businesses bought by VCP were complete mugs. You would need alot of time to unravel the various deals at VCP which may in part explain why the rating is not higher.

Paul Scott

Hi truegent,

Fevertree Drinks (LON:FEVR) is now way above the size of company that I look at, it's nearly £1bn market cap!

Quite astonishing for a maker of tonic water. They've very cleverly created & exploited a new niche.

Mind you, I've blind tested several people with FEVR, and none of them has been able to detect the slightest difference in taste to normal Schweppes tonic water. So personally I think it's a triumph of marketing over substance!

Regards, Paul.

Small Cap Value Report (26 Jul 2016) - CLL, SDY, VLX, VCP

Cello (LON:CLL)

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Paul Scott

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