Small Cap Value Report (8 Jan 2015) - CRAW, ITQ, FBT

Thursday, Jan 08 2015 by

Good morning! It's that time of day when I think to myself, right, better turn off Twitter and stop ticker-watching, and actually write something!

Incidentally, I updated yesterday's report in the evening for the trading updates from;

Majestic Wine (LON:MJW)
Escher Group (LON:ESCH)
Topps Tiles (LON:TPT)

As well as previous comments on Boohoo.Com (LON:BOO)

So to review yesterday's full report please click here.

Crawshaw (LON:CRAW)

Share price: 48.25p
No. shares: 79.6m
Market Cap: £38.4m

Trading update - as this small butchers chain has put out a Christmas trading update, I'm guessing that this must be their peak trading period - presumably driven by sales of turkey, and all the other meat we feast on over the festive season.

It's a bit of a mixed bag. The key point is that trading over the 9 weeks to 28 Dec 2014 was "in line with management expectations". That's good. However, LFL sales were actually down 3%, but they say this was expected, due to exceptionally strong sales last year (up 21%).

Gross margin improved by 100 basis points, which offset the fall in sales, so positive there.

Year to date LFL sales are up 6%, but the growth rate has slowed throughout the year, and is now negative.

Valuation - we already know why this share looks so expensive in the short term - it's because the valuation is anticipating a substantial roll-out of new stores. The company is, I believe, intending to open 10 new stores in year 1, then 20 new stores annually thereafter. They won't find that easy though - I've done a retail roll-out myself, of similar scale, and it's a nightmare to manage, but it can be done.

So really, it doesn't make a lot of sense to look at the near term figures for PER, etc. However, for the sake of completeness, the house broker has today confirmed its estimate of £1.0m profit (EPS 1.1p) for the current year, which is about to end shortly, on 31 Jan 2015. That gives a PER of 43.4.

The broker is then forecasting a fall in profit next year, to only £0.6m (EPS 0.6p), due to up-front costs needed in infrastructure to support the future store roll-out plan.…

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Crawshaw Group Plc is a United Kingdom-based company, which operates a chain of meat-focused retail food stores. The Company has approximately 40 stores, which are located across Yorkshire, Lincolnshire Nottinghamshire, Derbyshire and the North West. The Company's product range is categorized into approximately two distinct areas, such as Traditional raw meat, and Hot and cold cooked food. Under the Traditional raw meat category, it offers various products sold either loose in a serve over counter for the traditional experience or as multi buy packs on supermarket style multi deck counters, which have all been cut and packaged in store. Under the Hot and cold cooked food category, it offers freshly prepared roast chickens, gammon and pork joints, hot roast sandwiches, shop cooked curries and casseroles, chicken and chips, as well as other traditional deli products. Its stores include Arndale Centre in Arndale; The Arcades in Ashton Under Lyne, and Fresh Meat Factory Shop in Astley. more »

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InterQuest Group plc is a United Kingdom-based specialist technology recruitment company. The Company offers permanent and contract recruitment in various markets, such as digital, information security, analytics, telecommunications and change management. Its segments are Niche, which includes recruitment practices focused on analytics, business intelligence, cyber security, Internet of things, telecommunications and risk; ECOM Recruitment Limited, which is a recruiter in the digital market space; Enterprise, which includes Recruitment Process Outsourcing services together with legacy client relationships with customers in the financial services and retail sectors; Public sector; Business Change, which is a candidate centric spot business focused on change management and providing the Company with an alternative route to market, and Other. The Company's subsidiaries include InterQuest Group (UK) Limited, Contract Connections Limited, Contract Connections B.V. and InterQuest Asia Pte. more »

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Blackbird Plc, formerly Forbidden Technologies Plc, is a United Kingdom-based company engaged in the development and commercial exploitation of cloud-based video technology. The Company is engaged in developing cloud video platform used for its Forscene professional editing suite, its video social network, eva, and its online video editor, Captevate. The Company's products are delivered through an integrated Web-based platform. The Company's cloud-based technology and products enable news and sports broadcasters to get their Web and mobile highlights to markets; help post-production and broadcast clients; allow brands, influencers and celebrities to access audiences and their authentic content, and allow consumers to edit and share video in a new way. Forbidden Technologies Inc is the subsidiary of the Company. more »

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

15 Comments on this Article show/hide all

khalidf 8th Jan '15 1 of 15

Any comments on audioboom? Sounds like a fairly significant play in Africa..

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Paul Scott 8th Jan '15 2 of 15

In reply to post #89908

Hi khalidf,

I only usually comment on contract win type announcements if companies specify what their financial impact will be. If companies don't say what the financial impact will be, then it almost certainly means they either don't know, or the figures are not material to future profit expectations.

In the case of Audioboom (LON:BOOM) I had a nice speculation on it last year, making a handsome profit, but after having lunch with a bear on the stock, I began to realise that the valuation is utterly bonkers.

It's a nice App, I use it myself, but there are a lot of big question marks over whether this thing can ever make any money. It's the type of stock that will put out endless breathlessly excited RNSs, but then when you read the results, you'll stare at the page and wonder why there's hardly any turnover, but heavy losses every year!

So for me, I've had my fun with it, it's nice to catch a speculative wave on something that doubles or more, but it's also important not to fall in love with the story, and continue holding whilst they gradually drift back down again, as this type of stock usually does.

Regards, Paul.

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khalidf 8th Jan '15 3 of 15

Thanks for your feedback, Paul. Much appreciated as always...

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pep 8th Jan '15 4 of 15

Although a bit off-topic, I meant to bring this to your attention earlier, but better late than never, as it illustrates the increasingly Harry Potterish esotericism creeping into the world of the RNS.

30 December 2014
RNS Reach

ServicePower Technologies Plc
("ServicePower" or the "Company")

ServicePower recognised in Gartner report

ServicePower Technologies Plc (AIM: SVR), a market leader in field management software, is pleased to announce that it has been recognised by Gartner as a Visionary in its 2014 Magic Quadrant for Field Service Management ("FSM"), as published on 22 December 2014.

ServicePower has improved its positioning in the quadrant from 'Niche Players' to 'Visionaries'. According to Gartner, 'Visionaries' display technology or business model innovation, including the Nexus of Forces, and may influence or will soon influence, the direction of the FSM market.

Marne Martin, CEO of ServicePower, commented: ServicePower has worked very hard this past year on its products and team and it is fantastic to be recognised as a Visionary on the Magic Quadrant for Field Service. We believe it is testament to the quality and strength of our platform and of our roadmap for the future of Field Service Management.

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foxy1959 8th Jan '15 5 of 15

Paul, re CRAW, surely there has not been a fall in sales? LFL sales are up 6% thus far on the year but of course there have been a number of new store openings since last year. The LFL comparison was against a bumper 21% rise in the same 9 week period last year

| Link | Share | 1 reply
Ramridge 8th Jan '15 6 of 15

Hi pep - ServicePower Technologies (LON:SVR) Yes, I saw this yesterday and my quick reaction was that being visionary doesn't put bread on the table in the near term. I quickly put this in my mental dustbin and moved on.

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Paul Scott 8th Jan '15 7 of 15

In reply to post #89922

Hi foxy1959,

Indeed, I covered all those points you mention in the report. Maybe re-read that section?

What I was trying to say near the end, was that the trend is slowing. i.e. if LFL sales are up 6% YTD , but the most recent figures are down 3%, then the trend has changed from being strongly up earlier in the year, to starting to decline in the last 3 months, but the total for the year is still up 6%.

All the figures I quoted are LFL sales figures (like for like - so stripping out the impact of any new or closed stores).

Regards, Paul.

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Splode 8th Jan '15 8 of 15

I have been in CRAW for nearly 1½ years since when the SP has risen 6-fold and value metrics have dropped substantially, but I am still half in. The key is whether Mr Collett will be able to pace the roll-out self-sustainably - it may be tougher than he did with Lidl where the value proposition was (is) so compelling.

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foxy1959 8th Jan '15 9 of 15

Agree LFL sales growth slowing but growth very much on the up with several new shops last year and ten more this year. I guess if they had a massive nine weeks last Christmas there is just so much you can sell per shop. I like rising margins and the roll out and hope for £2 in 3-4 years

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shanklin100 8th Jan '15 10 of 15

Hi Paul

Re CRAW...

My opinion - this investment is all about the roll-out of new stores - and remember they already have the cash in the bank to do about 20. So investors will need to be patient as the new (ex-Lidl) CEO starts opening those new stores, and much higher profit should then flow through.

Only a small point but my understanding is that the process of finding new stores, fitting out and opening them is ongoing. Obviously, beyond the factory shop, nothing has happened recently on this front CRAW believe justifies an announcement, but this process is not paused waiting for the new CEO to tick whatever boxes might need ticking in some bureaucratic approval process..

HTH. Cheers, Martin

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johnrosier 8th Jan '15 11 of 15

I have just posted this on my website as part of my New Year Review of all my holdings.

Crawshaw Group (Aim All Share, Market capitalisation: £37.0m, 47p and 3.6% of JIC Portfolio); I posted on this earlier today following its Christmas trading statement and concluded that although profits will be in-line with expectations the market would be disappointed with the sales figure; as I write the stock is off around 9%.
This has been one of the best performing stocks in the JIC Portfolio having first bought at 13p just 14 months ago. You can see all my posts on the stock on the column on the right but to recap why I like it;

It is excellently managed under the chairmanship of major shareholder Richard Rose, who in the past had had great success turning around Whittards, before selling it to private equity, and has seen strong growth in shareholder value at Booker, Anpario and AO.World where he is also chairman.

The Company has a strong business model which it intends to roll-out nationally; it currently has around 20 outlets and plans to increase this to 200 and as Rose recently said “if 200 why not 500?"

It has made a good appointment of Noel Collett as CEO who joins on March 1st. Collett seems to have the requisite skills given his previous position as Chief Operating Officer at Lidl UK where he oversaw the increase in stores from 200 to over 600.

It raised the finances to get the expansion underway in the middle of last year through a successful share placing which bought some new supportive shareholders on board.

A few years out this stock could be a £200m+ annual sales business with strong cash flow and dividends; I feel confident that the new CEO and Richard Rose can deliver.

Conclusion: I have to be sure that I have not fallen in love with the stock and as a former colleague of mine tweeted yesterday “the only reason to buy a stock is to make money. They are not part of your family!" So would I buy now if I didn't own it? The answer is yes but probably not the current 4.0% of my portfolio; just 2.0% as I think there is a risk that in the short term it may be dead money; it really needed a trading statement that sparked upgrades. Hopefully, once the new CEO gets stuck into the business and communicates his plans, shareholders may start to focus on the longer term prize of a substantially larger and more profitable business. Not so Happy a Holder as I was!

Website: JohnsInvestmentChronicle
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Paul Scott 8th Jan '15 12 of 15

In reply to post #89952


That's an intelligent & balanced review of Crawshaw (LON:CRAW) from you - good stuff!

Regards, Paul.

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narp 9th Jan '15 13 of 15

In reply to post #89952


Is your conclusion telling you to reduce your holding to 2%?

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johnrosier 9th Jan '15 14 of 15

Difficult one but I think after yesterday's fall, not at the moment. Could of course go lower but not sure the downside is worth reducing position at this level.

Website: JohnsInvestmentChronicle
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foxy1959 10th Jan '15 15 of 15

CRAW seem to be generating cash, £1m in the first half at which point they had £10m in cash for the roll out, now over 25% of the market cap. I think on EV/cash flow terms the valuation looks much more attractive than first impressions

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 Are LON:CRAW'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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