Small Cap Value Report (Fri 17 May 2019) - CRL, FUTR, STAF

18th May by Graham Neary

14 comments 4852 reads

Good morning!

Not much to report on from my hotel room this morning, which is just as well since I only have about an hour before I have to leave to speak to the crowd at Mello.

There were excellent presentations yesterday from Impax Asset Management (LON:IPX), Scientific Digital Imaging (LON:SDI) and Judges Scientific (LON:JDG), and probably lots of other companies I missed.

Today I'll look to attend presentations from Water Intelligence (LON:WATR), Sosandar (LON:SOS), Character (LON:CCT) and Avation (LON:AVAP).

In this report I will try to cover:

Creightons (LON:CRL)
Future (LON:FUTR)
Staffline (LON:STAF)

Creightons (LON:CRL)

Share price: 28p (pre-market)
No. of shares: 62.5 million
Market cap: £17.5 million

Final results timetable and trading update

(Please note that I currently have a long position in CRL.)

Not sure how the market might react to this - I don't see any broker forecasts - but it's ok from my perspective.

H2 revenues will be "broadly similar" to H1. For context, the H1 result was £22.3 million (with PBT £1.4 million).

"Broadly" usually means "a little lower", so we might see full-year revenues of c. £44 million, maybe?

Revenues in FY 2018 were £34.8 million, so that would be a 26% increase.

The company has also enjoyed a little bonus:

a one-off benefit from the recovery of R&D expenditure through the government's corporation tax rebate scheme in the region of £350,000 in respect of 2016/17 and 2017/18 and thereafter for the duration of the scheme, the company is likely to receive an annual benefit proportionate to our allowable R&D expenditure.

I presume this means about £180k benefit for each financial year, adding up to £350k in total.

When you have a market cap of less than £20 million, every little helps. I'm happy to continue holding.

Future (LON:FUTR)

Share price: 914p…

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brianbathgate

17th May

Any thoughts on FUTR?

blondeamon

FUTR?

Maket missed this one competely and its rise is just getting started.

Camtab

Graham sorry I missed you yesterday. I did see you several times in conversation but hard to get a moment with you. I went to Duke presentation which was very interesting and also Beek Financial which is a company I really like. I spoke to the Avation CFO, but some how aircraft leasing just feels the wrong business for me. I am very concerned about the environment and we have to reconsider how we use airplanes. His explanation that the millennials are more interested in experiences than assets and therefore fly more isn't at all unreasonable in the world we live, but unfortunately we have to find ways to reduce the carbon output. The CFO's response was they are up with technology which is fine but.......

Graham Neary

Morning - yes, am taking a look at FUTR.

No worries Camtab, maybe see you today!

paraic84

Yes Creightons (LON:CRL) update confusing - especially as the use of the word 'but' implies the first part of the sentence is bad news. "The Company reports that the sales in the second half of the year to 31 March 2019 are likely to be broadly similar to those for the first half, but there will be a one-off benefit from the recovery of R&D expenditure "

But surely that would be good news as it implies continued growth over the previous H2 - as it would be £22m revenue H2 in 2018/19 vs c.£18m H2 in 2017/18.

Maybe the issue is that the revenue growth has slowed a bit. But Creightons (LON:CRL) is so cheap that even flat revenue growth would be good!!

Remember c.2p EPS for H1 2019 and it closed trading yesterday at 27p.

iwright7

Graham,

Yes enjoyed the Mello presentations yesterday, (including your own). I have a starter Scientific Digital Imaging (LON:SDI) holding and it was the 1st time I had heard the CEO present. I was particularly struck by how supportive attendees/shareholders are of their buy and build strategy and the management's and shareholders almost religious commitment to SDI's success. I also caught the end of the Judges Scientific presentation and it stuck me what a great fit buying SDI would be. Both aspects encourage me to hold.

john652

Staffline (LON:STAF)

‘Tight labour market, transferring contractors to perm’ , this sounds dubious to me, let’s fix our flexible resource cost because of what might happen, not come across this before as a general employer view.. ‘Slowdown in contract market’ I agree with above comments on this, really. I posted earlier in week on Empresaria (LON:EMR) and the possible impact from the new IR35 rules which HMRC have been trying to implement for 20 years, and finally lookro have nailed it putting responsibility on employers, and I think Staffline (LON:STAF) issues might be related to this, maybe not but I think sufficiently worrying that I sold out of Empresaria (LON:EMR) this week,

For those invested in recruitment have a look here:

https://www.gov.uk/guidance/ir35-find-out-if-it-applies

A beneficiary of this should be FDM (Holdings) (LON:FDM) who have a clever model picking up stem graduates who failed to get into the banks/consultancies/lawyers, training them and putting them into firmly ‘relatively’ cheaply, the firm then has an option to buy them off FDM.

Gromley

A late RNS from yesterday from Spectre Holdings (Philip Day) on the subject of Bonmarche Holdings (LON:BON)

As I have posted elsewhere :

As expected, there has been very little take up of the mandatory bid. Day is not pushing it further at this stage, but the offer will remain open until further notice (which will be not less than 14 calendar days).

Somewhat disappointingly Day appears not to be engaging with the Board and is simply giving them enough rope to hang themselves / giving them the benefit of proving their own plans – depending on which way you look at it.

Somewhat ominously Spectre “does not feel it is appropriate for Bonmarché to take on additional bank debt in light of its recent trading performance and continuing challenging market conditions.” It’s not clear to me that they would need to raise more debt, but I am reminded of the situation at Debenhams where it appeared to me that Mike Ashley limited the boards options – they did not work out well for Ashley or for other shareholders.

Overall, whilst I find the lack of engagement a little disappointing, the continued availability of “the offer” still limits the downside and offers and asymmetric risk vs. reward balance, so I continue to hold.

Disappointingly could only make Thursday. Enjoyed your beginners course on investment though, very useful.

Paul Scott

18th May

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Welshborderer

Cockerhoop

iwright7,

Not a chance of Judges Scientific (LON:JDG) taking over Scientific Digital Imaging (LON:SDI). Both companies buy & build strategies rely on buying private businesses on a price to EBIT of 4-6. Buying on a comparable multiple would be sacrilege to DC.

Small Cap Value Report (Fri 17 May 2019) - CRL, FUTR, STAF

Creightons (LON:CRL)

Future (LON:FUTR)

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Graham Neary

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