Small Cap Value Report (26 May 2017) - VLE, PLA, SDI

Friday, May 26 2017 by

Volvere (LON:VLE)

  • Share price: 705p (+5%)
  • No. of shares: 4.1 million
  • Market Cap: £29 million

Final Results

(Please note that I currently hold a long position in Volvere)

I don't get to use the above disclaimer very much, because my personal portfolio is recklessly undiversified. I only own nine stocks, and the top 5 currently account for 75% of everything (or 79% if you exclude cash). Volvere is a top 5 holding for me.

I bought into it when I discovered it a year ago, and you can find my article on it at this link (external website).

It's an investment company, which typically seeks out unlisted companies which are in need of change - often a change in their financial structure (removal of bank debt) or occasionally a change in strategy/management. It's a supportive shareholder, not a raider or an asset stripper.

It only holds a few investments at a time, and currently has 3 in its portfolio.

Two brothers are the key executives. They own 25% and 13% of shares, respectively.

Today's Results

These results are for the year ending December 2016 - admittedly, slow reporting.

But they're rather good:


As a consequence of the above, NAV increases to 617p from 569p. That's an increase of 8%, below Volvere's prior long-term average of 15%.

NAV moves in mysterious ways, however. Because Volvere's holdings are unlisted, they are held on the balance sheet at the price originally paid for them, and they only increase NAV by their net profit contribution to the group every year. But if they are sold after profitability has improved, then you can get a sudden jump in NAV (as the underlying gain in value is realised).

Last year, NAV increased by 32%, as an investment was disposed of after its profitability had improved.

This year, there has been no disposal, but PBT has significantly improved, as you can see in the table above.

Shire Foods, previously the largest contributor to profits, lost a large customer and saw margins increase as a consequence of the Sterling devaluation, and PBT reduced from £1.6 million to £1.15 million (before the charges Volvere makes for managing it and lending to it).

The big winner, however, was the new holding Impetus Automotive, a…

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

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Volvere plc is a holding company. The Company identifies and invests in undervalued and distressed businesses and securities, as well as businesses that are complementary to existing group companies. It operates through Food Manufacturing segment. Its food manufacturing segment consists of the Company's subsidiary, Shire Foods Limited (Shire), which is engaged in manufacturing frozen pies, pasties and other pastry products for retailers and food service customers. more »

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Synnovia PLC, formerly Plastics Capital PLC, is a holding company. The Company is principally engaged in the manufacture of plastic products focused on products for various markets exporting to over 80 countries across the world. Its segments include Industrial, which consists of hydraulic hose consumables, packaging consumables and plastic rotating parts, and Films, which includes high strength film packaging. Its operations are based on the six operating businesses: BNL (UK) Limited, which makes plastics rotating parts; Palagan Limited, which makes high strength film packaging; C&T Matrix Limited, which makes the packaging consumable of creasing matrix; Bell Plastics Limited, which makes hydraulic hose consumables; Beijing Higher Shengli Printing Science and Technology Co Ltd, which also makes creasing matrix, and Flexipol Packaging Limited, which makes high strength film packaging and bags. It has over five factories in the United Kingdom, approximately two in China. more »

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Scientific Digital Imaging Plc designs and manufactures scientific and technology products for use in applications, including life sciences, healthcare, astronomy, consumer manufacturing and art conservation. The Company's segment encompassing Synoptics three marketing brands, Syngene, Synbiosis and Synoptics Health. The Company, through its subsidiary, Synoptics Limited, develops and manufactures scientific instruments and systems that develop digital imaging technology for a range of disciplines. Synoptics Limited offers its products through four divisions: Syngene, Synbiosis, Syncroscopy and Synoptics Health.The Company through its Opus Instruments Limited, manufactures the infrared imaging system designed for art conservators to provide images in a portable camera. The Company, through Artemis CCD Limited, manufactures light imaging cameras. The Company through Fistreem International Ltd manufactures water purification products and vacuum ovens. more »

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

32 Comments on this Article show/hide all

FREng 26th May '17 1 of 32


Thanks for looking at Volvere (LON:VLE) (I hold).

I see that the CEO holds enough shares to block a special resolution (a whisker over 25%) and the brothers together hold 38.47% (are they a "concert party"? I have never understood the definition).

The Chairman has 3.18% and "chairs and comprises" both the audit committee and the remuneration committee!

The Corporate Governance Statement in the results is therefore a collectors' item:

"The Board gives careful consideration to the principles of corporate governance as set out in the UK Corporate Governance Code ("the Code") updated by the Financial Reporting Council in September 2014. However, the Company is relatively small and it is the opinion of the Directors that not all the provisions of the Code are relevant or desirable for a company of Volvere's size. On this basis we do not comply with the Code.

The Company has established an Audit Committee and a Remuneration Committee with formal terms of reference which comprise and are chaired by the Chairman."

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Weasel 26th May '17 2 of 32

Graham, it's not February! Lol

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xcity 26th May '17 3 of 32

It's the sort of company where you either trust the people or you don't.

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Graham Neary 26th May '17 4 of 32

In reply to post #189094

Haha, thank you Weasel.

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Trigger14 26th May '17 5 of 32

Graham, if you don't mind my asking, why do you run a portfolio that you describe as 'recklessly undiversified'? Is it just because you want to take a lot of risk or do you actually think it is not as reckless as you suggest?

I ask because I've been thinking about my own diversification recently and have come to the view that:
A) I don't need that much diversification to effectively manage idiosyncratic risk from individual shares. I think 10-15 shares seems enough for this.
B) I am generally much more concerned about the risk of equities (or classes of equities) crashing in general. I think managing 'market' risk is actually probably easier with a smaller number of shares (so I can more easily ensure they are less cyclical / correlated with the market).
C) Since my strategy is quite reliant on momentum and on occasion selling out of shares quickly, the liquidity of individual shares can sometimes be a more relevant constraint on the size of any individual holding.

Blog: Quality Share Surfer
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Aislabie 26th May '17 6 of 32

The market survives on differing views and this site is a great opportunity to see others points. On Volvere (VLE) I find that I am way less impressed than Graham (I don't hold). I understand the very attractive potential of Impetus but the group is also shackled to a declining margin, capex-demanding, food business in a far from unique space. I am also more than a little surprised to see 52 days of finished goods inventory. I assume this is Shire Foods, since I cannot see any finished goods arising from Impetus and very little from the small CCTV business.
VLE may be able to turn Shire into a shining star but per Buffett we are reminded that lousy busnesses usually defeat even great management.
It reminds me a bit of Melrose (MRO) where great businesses are bought, expanded and sold profitably while Brush sticks to them soaking up cash and management effort.

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JohnEustace 26th May '17 7 of 32

Hi Graham,
I would appreciate any views on Scientific Digital Imaging (LON:SDI). It's a "high flyer" which is down 11.7% on a meeting expectations update which I guess was a bit too weak for the market. I have a small position.

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zoolook 26th May '17 8 of 32

Focusing on the bigger picture and going on Graham's calculation the market is only valuing 3 profitable businesses at £7.1 m which is an absurd under valuation. Fill your boots while stocks last!

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clarea 26th May '17 9 of 32

Hi Graham I would also be interested in your low diversification strategy is this something you have always adapted or more recently moved towards ? Have you found your performance has increased with low number of stocks held ?
I've recently switched to a max of 12 funds but scale in each investment as the price goes up rather than lumping a twelfth of the total pot in one go when I find something of interest given I;ve only started this last three months running also a momentum screen I'm beginning to think maybe this market is up with events as not much seems to want to go much higher.

Thanks again

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ricky65 26th May '17 10 of 32

Graham, thanks for the section on Scientific Digital Imaging (LON:SDI).

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purpleski 26th May '17 11 of 32

Hi Graham

Great post today and Volvere (LON:VLE) looks like an interesting company, which I will research some more. I wished I had come across it a year ago!

I like the management's direct speaking. Have you ever met them?

Like others above I would be interested to hear your reasons behind your running a concentrated portfolio? I run a relatively concentrated portfolio of 16 holdings and the top five reperesenting 60% of the ex-cash portfolio and the top holding 20% on its own. I do believe that if you one goes much beyond 15 stocks you might as well buy an etf.

I may regret my concentration but I was up 35% last year and 48% YTD so I am happy to stick to this strategy which I have decided to follow after reading Buffet, Lynch and a number of others who believe in having a few eggs in a carefully watched basket.

Have a good weekend.

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herbie47 27th May '17 12 of 32

In reply to post #189244

I think Buffett has around 40 shares. He also has larger us companies.

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

About Graham Neary

Graham Neary

Full-time investor and independent analyst. Editor at Cube.Investments, small-cap writer at Stockopedia. Previously a fixed income analyst in the City and institutional fund manager. I'm a CFA charterholder and have the Investment Management Certificate and STA Diploma in Technical Analysis for good measure. When I'm not talking about finance, I enjoy recreational poker, chess and Mandarin Chinese. more »


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