Small Cap Value Report (31 Jan 2017) - CPR, JOUL, QRT, ALU, SCS

Tuesday, Jan 31 2017 by

Good afternoon, 

Apologies for the slow service today.

I thought it worked well yesterday, taking suggestions about which stocks to cover.

So if you have any suggestions, please let me know.

I provisionally intend to cover:



Carpetright (LON:CPR)

Share price: 185.5p (+6.6%)
No. shares: 67.9m
Market cap: £126m

Q3 Trading Update

I covered Carpetright recently, in the SCVR of Dec 13th.

That was the interim results, when the company reported: 

We have made an encouraging start to the second half with a return to like-for-like sales growth in both businesses.  As we enter the important January trading period, we remain comfortable with the range of market expectations.

It has certainly delivered on that today, confirming as follows:


Other bullet points:

  • Number of UK stores reduces slightly to 427.
  • Rest of Europe like-for-like, constant FX sales (the best measurement) are up 5.4% (in reported currency, up 22.4%).
  • The CEO comments and lets us know that the store refurbishment plan is on track. Excellent news.

I haven't got much to add to what I said last time - namely, that I think there is a good chance that management can execute their investment plan, at considerable cost but with the opportunity of creating attractive medium-term benefits.

More than three quarters of CPR's operating cash flow in H1 was spent on the refurbishment plan. We can't expect much free cash flow here for now. But if it helps to restore strong performance, it will certainly have been worth it.

Joules (LON:JOUL)

Share price: 216.5p (-2%)
No. shares: 87.5m
Market cap: £189m

Interim Results

Following the pre-close trading update in December, I warmed to this share, thinking that it could grow into its (then, 195p) share price.

The company is making that argument easier now:


When I ran the numbers on last year's financials, I thought that a fair estimate of the full-year result was about £7.1 million in PBT.

Those results were riddled with "non-underlying" costs, and today's report again insists on making some adjustments.

They are fairly simple, though: just £0.3 million…

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

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Carpetright plc is engaged in providing floor coverings and beds. The Company operates through two segments: UK and Rest of Europe (comprising Belgium, the Netherlands and Republic of Ireland). The Company trades from approximately 440 stores and concessions in the United Kingdom, as well as over 140 stores across Holland, Belgium and the Republic of Ireland. The Company offers free home estimating services. The Company's product range includes carpets, mattresses, headboards, laminate flooring, engineered wood flooring, rugs, vinyl flooring, luxury vinyl tiles and flooring accessories. Its luxury vinyl tiles are available in a range of designs, including tile, oak, pine and stone. It offers a range of beds and bed products, including divan beds, roll up mattresses, bed frames and others. It offers a range of options from memory foam mattresses to open coil and pocket spring mattresses. Its brands include Kosset, Essential Value, Storeys, Carpetright Clearance and Carpetright. more »

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Joules Group PLC is engaged in the design and sale of lifestyle clothing, related accessories and a homeware range, through the multi-channel business structure embracing retail stores, e-commerce, county shows and events and wholesale. The Company has three segments: Retail, Wholesale and Other. The Retail segment includes sales and costs relevant to Stores, E-commerce, Shows and Franchises. The Wholesale segment includes sales and costs relevant to the sale of products to other retail businesses or distributors for onward sale to their customer. The Other segment includes income from licensing. The Company's products include womenswear, menswear, Little Joule, Baby Joule, Wellies and homeware. The Company operates 97 the United Kingdom and Republic of Ireland stores (including five concessions) and three franchise stores. Joules branded products are sold through selected wholesale partners, primarily in the United Kingdom, North America and Germany. more »

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The Quarto Group, Inc. is an illustrated book publishing and distribution company. The Company is engaged in creating content and publishing books from a diverse portfolio of imprints. The Company operates through segments, including Quarto International Co-Editions Group; Quarto Publishing Group USA; Quarto Publishing Group UK, and Quarto HK. The Quarto International Co-Editions Group segment creates illustrated books that are licensed and printed for third-party publishers for publication under their own imprints. The Quarto Publishing Group USA segment creates and publishes illustrated books in North America and sells co-editions of them internationally. The Quarto Publishing Group UK segment creates and publishes general non-fiction and illustrated books in the United Kingdom market. The Company’s books are sold in approximately 50 countries and in 39 languages. more »

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

44 Comments on this Article show/hide all

Michael Billingham 31st Jan '17 25 of 44

in reply to posting 22:-

Laughton, thank you for the lead to the BooHoo response.

I couldn't make contact - is the lead correctly stated?

Certainly the market has ignored what appeared to be a very biased report.


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Fishcake 31st Jan '17 26 of 44

In reply to post #169558


That reads very well to me - though I didn't see Dispatches.

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Trident 31st Jan '17 27 of 44

I am not a holder of BooHoo (past or present)
Generally I don't have a high opinion of Dispatches reports. They often seem quite thin on content.
Whilst I am sure whistleblowing is an important source of stories, it can also be a cover for revenge or self righteoousness. No context was given to the whistleblower, other than he was changing job and had decided to call in an undercover TV report.
An important subject in this day and age is the responsibilities of online companies, but it left a question mark quite how this story had been shaped.

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mercury61 31st Jan '17 28 of 44

In reply to post #169561

I'm afraid I don't take much comfort from this press release.
Many employer codes of conduct etc etc READ very well BUT the REALITY is never like the stated objectives. Very often employees will not speak out for fear of losing their job or not being promoted.
The bit about ''We have announced a £5m spend on new facilities for 2017, designed to improve the working environment of our employees. This will include a 24 hour subsidised restaurant as well as gym and leisure facilities'' is particulary galling... I guess that's for use by management who would have the TIME and ENERGY to make use...
Not quite naked slave labour as presumably they use some of the companies clothes to dress up a poor stae of affairs.

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Michael Billingham 31st Jan '17 29 of 44

In reply to 26 - and 22

Thank you Fishcake, Yes, a good response from BooHoo which, it would seem, was largely ignored by the Dispatches programme.

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fdthomas 31st Jan '17 30 of 44

I'm on holiday in cape town until May, enjoying the good weather, not interested in anything other than getting a decent tan

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Sunny350 31st Jan '17 31 of 44

Hi Graham, any thought on EYE if you should find the time. Thanks!

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mercury61 31st Jan '17 32 of 44

RE CPR Carpetright... I wonder how this good news will impact on other likeminded companies e.g. UCG United Carpets Group a small outfit market cap of £8.45m

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mercury61 31st Jan '17 33 of 44

In reply to post #169606

United Carpets (LON:UCG)

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mercury61 31st Jan '17 34 of 44

sorry all - just worked out how to do this United Carpets (LON:UCG) busines

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dahokolomoki 31st Jan '17 35 of 44

On Joules (LON:JOUL), the reviews on TrustPilot have a consistent theme of declining product quality and poor customer service:

When you buy new IPOs, you have to take care as a common tactic of the private owner is to sacrifice quality and service in the 6-12 months before IPO, to aggressively grow top line growth (via marketing), increasing margins, and bumper profits, thus getting the maximum valuation when it IPOs. However, customers who are once bitten are twice shy.... and the impact of declining quality and service on brand loyalty only makes itself apparent 12-24 months after IPO.

By which time the original private owners have cashed out already, and so have management.

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iwright7 31st Jan '17 36 of 44

In reply to post #169519

Re Quarto Inc (LON:QRT)   Sold this morning and my notes below....

CEO delivering mixed messages which I don't like. Cheap PE for a reason. Agreed to sell BGD for £11M writedown. Debt increased somewhat. Not good. Ian

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simoan 31st Jan '17 37 of 44

In reply to post #169591

I'm on holiday in cape town until May, enjoying the good weather, not interested in anything other than getting a decent tan

What? Not even interested in the hole in the Ozone layer and the damaging effects of UVB radiation? 


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dgold 31st Jan '17 38 of 44

Graham, thanks for your informative articles. While we look forward to hearing your opinion on SCS (LON:SCS) I hope you don't mind if I just point out that you have put the wrong share price, number of shares and market cap for the company in the header of the soon-to-be article.

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Ramridge 31st Jan '17 39 of 44

In reply to post #169591

I would go easy with the tanning bit. Trump's paranoia knows no bounds.

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Graham Neary 1st Feb '17 41 of 44

In reply to post #169648

Thanks dgold, I have a bad habit of missing that sometimes. Fixed now.

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Graham Neary 1st Feb '17 42 of 44

In reply to post #169531

Thanks for letting me know, Fabrizzio!

And if you didn't enjoy it, I'd be happy to read criticism.



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slord54 1st Feb '17 43 of 44


Not sure if you are aware (I don't think it has been mentioned yet) Paul interviewed the CEO of Quarto last year:

It is an enjoyable listen.

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fdthomas 2nd Feb '17 44 of 44

No I'm not interested in the ozone layer,my thinking is not that deep! All I know about climate change is that we don't get any of the heat other countries get in the uk, it's still bloody cold from November till March, then rain in March @ winds in April,that's your I'm only going to do 6 months in UK & 6 months in Cape Town from now on?

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

About Graham Neary

Graham Neary

Full-time investor and independent analyst. Prior to this, I spent seven years in the financial markets as an analyst and institutional fund manager. I'm CFA-qualified, also holding the Investment Management Certificate and the STA Diploma in Technical Analysis.Away from finance, my main interests are recreational poker and everything to do with China, especially Mandarin Chinese. more »


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