Small Cap Value Report (7 Jun 2016) - SRT, VP., BLV, VNET

Tuesday, Jun 07 2016 by

Good morning!

A shortish report today, as we have British Gas coming round to fit a "Hive" wireless controller for the boiler, and a washing machine repairman also visiting. Plus an investor lunch to get ready for.

In case you missed it, I had a 15-minute chat with Simon Tucker, the CEO of Software Radio Technology (LON:SRT) (in which I hold a long position) last night, asking him a few questions on their results, published yesterday. The link to the audio is here.

I know from the email list that quite a lot of PR companies & brokers read these reports. So just to flag up that if I write something positive about a company here, then (time permitting) I'd probably be interested in recording a 10-15 minute chat with the CEO or FD. Therefore do feel welcome to get in touch with me, to arrange, if that situation arises.

These interviews are a great way to communicate with c.1,000-3,000 private investors, via me. The feedback is really positive from investors, who seem to find these interviews helpful, and I enjoy doing them, so all good. I don't usually charge a fee to the company or the listeners, and there are no ads.

A reminder, it's the Q1 trading update for Boohoo.Com (LON:BOO) tomorrow morning. I know a lot of readers hold (as do I).


Share price: 710p (unchanged today)
No. shares: 40.2m
Market cap: £285.4m

Results y/e 31 Mar 2016 - another good set of figures from this group of niche hire businesses. A few key points:

Revenue only up 2%, to £208.7m

14% increase in basic earnings per share, pre-amortisation, to 62.21 pence (PER of 11.4)

Net debt up by almost £20m, to £86.1m - due to expansion of hire fleet, and 2 small acquisitions.

Operating profit margin looks strong, at 15.3%, and finance costs are modest.

ROCE is reported as 16.3%, which is a good return.

Divis up 14% to 18.85p (interim + final) - yield of 2.7%

Outlook comments sound positive:

Vp has, in the year under review, reported good progress, with further improvement in profit margins and returns, delivered from a relatively modest growth in revenues.  This trend is expected to continue as the varying demands of supportive infrastructure, housebuilding and construction markets play against a challenged oil and…

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SRT Marine Systems plc, formerly Software Radio Technology plc, is engaged in the marine technology business. The Company's principal activity includes development and supply of automatic identification system (AIS)-based maritime domain awareness technologies, and derivative product and system solutions for use in a range of maritime applications from safety and security to fishery management and environment protection. AIS is a mesh network radio communications system technology specifically designed for the marine domain, and it uses a combination of global positioning system (GPS) and high frequency radio to enable real time, simultaneous data communication between multiple, independent entities providing information, such as identity, GPS position, speed and other customized data. It offers a range of AIS products and maritime domain monitoring system solutions, which also fuse other maritime sensor technologies, such as radar, closed-circuit television and communications. more »

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Vp plc is engaged in equipment rental and associated services. The Company is engaged in providing products and services to a range of end markets, including infrastructure, construction, house building, and oil and gas, both in the United Kingdom and overseas. Its segments include UK Forks, Groundforce, Airpac Bukom, Hire Station, Torrent Trackside, TPA and TR Corp. The UK Forks segment is a hirer of telescopic handlers and tracked access platforms. Its Airpac Bukom segment offers oilfield services and is engaged in provision of specialist compressed air and steam generation services. Its TPA segment provides equipment rental and installation of portable roadways, walkways and stairways. Its Hire Station segment is a provider of small tools, lifting, safety, survey, press fitting and low level access equipment. Groundforce is a rental provider of excavation support systems and specialist products.TR Group provides technology solutions to corporate, industrial and government clients. more »

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Belvoir Group PLC, formerly Belvoir Lettings PLC is a United Kingdom-based company engaged in selling, supporting and training residential lettings franchises. The Company operates a nationwide property franchise group with four brands that offer a range of services in property rental, property management, residential lettings, buy to let and property sales. Its property franchise group manages approximately 58,000 properties in Grantham, Lincolnshire. more »

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

23 Comments on this Article show/hide all

rhomboid1 7th Jun '16 4 of 23

Hi FREng

I hold VP (LON:VP.) and like its business modell, as they put it:

"Vp is a specialist rental business
Our objective is to deliver sustainable, quality returns on behalf of our shareholders by providing products and services to a diverse range of end markets including rail, transmission, water, civil engineering, construction, house building, oil and gas. The Group comprises six specialist market leading divisions with operations in the UK and overseas."

On cashflow, the hire business model is a bit odd in the sense that as the business expands in the good times it consumes cash as the hire fleet expands as it is only part funded, when Mgt see the future more darkly they take the foot off the CAPex throttle and the resulting defleeting throws off cash . YE 2013 the net book value of Plant was £99m, 2014 it rose to £113m and last year it was £132m. What I like at VP is the family business attitude that means mgt are very conservative in setting residuals and estimated operational lives for assets that they are in most cases the market leader in managing/owning.

Where hire companies fall apart is being overly aggressive in growing the business by underestimating plant costs to support unsustainable hire rates , the track record of VP is very clear and creditable in this regard imho

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FREng 7th Jun '16 5 of 23

In reply to post #134405

Thanks, rhombold, that makes more sense of the figures.

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mikelevie 7th Jun '16 6 of 23

Hi Paul assume you approve of £IGR's refinancing just anounced? Market reaction is certainly positive.

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Gostevie 7th Jun '16 7 of 23
We even had the Jehovah's Witnesses call round too!!!

Just tell them that you have been "disfellowshipped":

They'll run away so quickly they'll leave skidmarks on your doorstep. :-)

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randv 7th Jun '16 8 of 23

Hi Paul

Re Q1 trading update. Where has this been quoted only there is nothing that I could find on Stocko (under Events except 24 June Annual Meeting) or Company website?


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herbie47 7th Jun '16 9 of 23

iomart (LON:IOM) results are out today, look quite disappointing to me only up 14% EPS but there are a lot of adjustments, was expecting +64% nEPS on Stockopedia but the market seems to like them, +2.7%, so what am I missing?

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James RH 7th Jun '16 10 of 23

In reply to post #134429


It's on the company website under the financial calendar:


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randv 7th Jun '16 11 of 23


Many thanks. I was checking RNS. Was surprised Stockopedia did not have an entry in the Event section of portfolio list.


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Nicowilson 7th Jun '16 12 of 23


Great write up (as always) and just to comment that Hive is great. Make sure that you have the app on your phone, and you can do clever things like turn the heating on before you get home


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Paul Scott 7th Jun '16 13 of 23

In reply to post #134429

Hi Randv,

Re Boohoo.Com (LON:BOO) Q1 update, scheduled for tomorrow morning.

I got an email from one of the company's advisers today, alerting me to it, so thought I would pass it on to readers here.

I think the email might have been from the email alert service on their website. It's always worth signing up for those, for companies of interest, I find, as its easy to miss things otherwise.

Regards, Paul.

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randv 7th Jun '16 14 of 23

Thanks Paul

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randv 7th Jun '16 15 of 23

Don't put your fingers in the Hive Paul you may get stung.


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ken lowes 7th Jun '16 16 of 23

I am writing this in the evening prior to the trading update. I have been looking at some of your long positions Paul and just cant see why you are holding them, but then I am no wizard with accounts having had the simple philosophy of " how much gross" what's left as net and how much cash have we got. Finally how long will the cash last if everything goes wrong. Looking at BOOHOO everything seems good except the share price and IMHO the figures will have to be spectacular tomorrow for the price to hold up. Not long to go to find out.

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crazycoops 7th Jun '16 17 of 23

Ah, such cool headed logic Ken. While I still don't get on well with charts per se, i do find the momentum rank here on Stockopedia very useful. Even if value looks super expensive, momentum can take a share price a long way - it's the getting out at the right time bit that I struggle with.

I've no position in Boohoo.Com (LON:BOO) as it's always seemed too expensive but fair play to those who caught the momentum on the way up, so far.

Blog: Share Knowledge
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herbie47 7th Jun '16 18 of 23

Yes Boohoo.Com (LON:BOO) share price maybe getting a bit ahead of itself, we will see what the update brings, looking for about 28% increase in EPS for this year, compared to ASOS (LON:ASC), who are nearest rival, they still look reasonable value and they do have a lot of cash. I'm a holder by the way. Ken you want to look at the high flyers screen.

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ISAallowance 7th Jun '16 19 of 23

Proactis Proactis Holdings (LON:PHD) announced a partnership agreement with P&O Ferries today which seems to have been well received by the market, shares up 7% or so.

With regards to Boohoo Boohoo.Com (LON:BOO), the Questor column in the Telegraph tipped it as "avoid" back in January It'll be interesting to see how it plays out over the next year or two given the differing opinions on this one.

[I have a small long position in Proactis, I have no position in Boohoo]

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herbie47 7th Jun '16 20 of 23

In reply to post #134486

Since January Boohoo.Com (LON:BOO) has gone up about 50%.

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PJ0077 7th Jun '16 21 of 23

In reply to post #134486

Having read Questor's insight into Boohoo, I doubt they'd be a fan of Amazon (AMZN) either.

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purpleski 7th Jun '16 22 of 23

I think Boohoo.Com (LON:BOO) is about where it will be in 3 to 5 years not tomorrow after a trading update and the management seem to know what they are doing and know their market and how to execute. I am reminded of Paul's comments about £ASOS being expensive at 27p all they way up to 7,000p. I am not sure what Boohoo.Com (LON:BOO) 's addressable market (sales) is but it must be in the billions and last reported turnover was £200m so it is a relative minnow. I am certainly prepared to wait this one out and see where the mkt takes it.

As for Questor's opinion, if it was that easy all we would have to do is spend a couple of quid each week on the Telegraph and sit back watch the profits roll in - oh that it was so easy.

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jonthetourist 8th Jun '16 23 of 23

Boohoo trading update:
Highlights for the three months ended 31 May 2016
· Revenue up 41% (42% CER)
· Strong UK performance supported by third party sales
· Retail gross margin 57.6%, down 300 bps on prior year, driven by planned investments in price and customer proposition
· Marketing expenditure reduced as a percentage of sales, offsetting retail margin decline
· Overall gross margin 56%
· 4.2 million active customers, up 30% on prior year
· £61m cash on balance sheet

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 Are LON:SRT'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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