Small Cap Value Report (Fri 22 March 2019) - VLE, SPE, PMP, TFW, XAR, SFE

Friday, Mar 22 2019 by

Good morning!

News today has thankfully calmed down a little, at least as far as UK small-caps are concerned.

This means I can go back and look at some of the stories I've missed this week:

From today's news, I might look at:

Volvere (LON:VLE)

  • Share price: £11.25p 
  • No. of shares: 3.1 million
  • Market cap: £35 million

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

I've been slow to update on Volvere. This might seem strange, given that it's my biggest holding, at 16% of my portfolio.

However, I felt there was little to say, since not much had changed as a consequence of Tuesday's trading update.

This update was the first piece of news since October. Things move slowly in Volvere-land!

Results for the year ending December 2018:

  • revenue from continuing operations improved to £18.6 million from £16.2 million. £18.3 million of revenue is attributable to Shire Foods. The rest to Sira Defence.
  • underlying result before tax from continuing operations is £100k.

Segmental Analysis

Shire's profit before tax and intra-group charges was £790k.

Volvere plans to invest £2 million into Shire in 2019, in the form of new plant and equipment.

Francis wrote a great comment on Wednesday after attending the company presentation, explaining that the focus is now on expanding Shire's vegan/vegetarian and healthy pies. The product range has already expanded a lot over the past year.

I still have a pretty good impression of Shire: could it be worth £10 million+ on eventual disposal, or is that too much to hope for? It has a freehold property in Leamington Spa, blue-chip customers and a decent track record. I'd like to see it generate PBT before intra-group charges of £1 million+ this year, but I know that it operates in a fairly competitively sector so I'm not going to get carried away at this point.

On top of that we have…

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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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Sopheon plc is a United Kingdom-based company, which is engaged in the provision of software and services in the product lifecycle management (PLM) market. The Company operates in two segments: North America and Europe. Its Accolade solution provides integrated support for innovation planning, roadmapping, idea and concept development, process, project, portfolio, resource and in-market management. Its offerings include alignment of long-term innovation plans with market requirements, industry regulations, and supply chain capabilities; generation and development of ideas and concepts to fill gaps relevant to achieving strategic initiatives; process and project management that tracks and enables decision making, focused on evaluating projects associated with innovation initiatives, and data management, analytics and integrity tools. Its subsidiaries include Sopheon Corporation, Alignent Software, Inc., Sopheon NV, Sopheon UK Ltd and Sopheon GmbH. more »

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Portmeirion Group PLC is a United Kingdom-based company, which is engaged in providing ceramic tableware, cookware, giftware and tabletop accessories. The Company has five brands: Portmeirion, Spode, Royal Worcester, Pimpernel and Wax Lyrical. The Company's segments include UK and US operations. Portmeirion offers tableware and gifts with collections, such as Sophie Conran for Portmeirion and Ted Baker collection. Spode brand includes Blue Italian, Blue Room and Christmas Tree. Royal Worcester is engaged in providing porcelain tableware and cookware collections. Pimpernel provides placemats, coasters, trays and accessories. Pimpernel also includes Wrendale Designs collection, which includes placemats, coasters, trays, ceramic and melamine gift sets. Wax Lyrical offers fragranced candles and reed diffusers. The Company caters to markets, such as United States, the United Kingdom, South Korea, India, Taiwan and Thailand. more »

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

27 Comments on this Article show/hide all

rmillaree 22nd Mar 8 of 27

Henry Boot (LON:BOOT) (260p)
Had a quick look at this company - can't remember having looked at this one before which is strange.

Initial thoughts are wow this is a company i could buy some shares in immediately.

EPS 28p - estimate was 26.7p so looks like a slight beat, although estimates during the year dipped from 28p to 27p. So bang on the money.

Estimated 2019 EPS 27p

Outlook statement seems fine
We anticipate that 2019 will be a challenging year, as the UK real estate sector adapts to the marketplace in anticipation of the UK's departure from the EU. In advance of this, we have taken the opportunity to reduce gearing through 2018 to take advantage of any opportunities which may arise through 2019. Henry Boot Construction has started the year with a strong committed order book, certain commercial developments anticipated to start during 2018 have now commenced and one sale expected to complete in 2018 completed in January 2019.

Ok thats pe of 9.6 - seems cheap - but they deal in land so that may be pe of 999.99 come the next recession.

Whats the debt 

Net debt reduced to £18.4m (2017: £29.0m) with conservative gearing at 6% (2017: 11%),

Ok thats pretty much dream numbers from a risk point of view.

Looks like the net tangible assets looks like 297 mill - shares in issue - hmmmm prefernce shares make this confusing. Lets turn to market cap per stocky 346 mill. So TNAV covering 855 of the shareprice.

Is there a secret piggy bank that will "guarantee" or at least help substantiate future earnings? (one can but hope)

The two key profit drivers within the Group are: Hallam Land and Henry Boot Developments. In 2018, Hallam Land, our land promotion business, performed exceptionally well, selling over 3,500 units on 24 sites to help replenish the UK housebuilder's development land inventory. It retains a site portfolio of 14,325 acres and still holds 16,489 units with planning permission, held at cost with no planning gain value recognition, that are working through the sale process.

Wowsers they hold 14k sites that looks like 4 years worth of future business just waiting to be actioned.

Hmmm - well they make  a profit on these unit sales though?

As our strategic land portfolio is held as inventory, accounting policy requires these assets to be held at the lower of cost or net realisable value. In accordance with this policy no uplift in value can be recognised within our accounts relating to any of the 16,489 plots over which planning permission has been secured. Any increase in value created from securing planning permission over these assets will therefore only be recognised on disposal.

Ok thats about as good as on can hope for profit not booked till sale and they have great pipeline of sales - looks like a nice secret piggy bank to me.

Other than land prices / recession fears i can't think of any reason not to snap up some shares right now - can anyone else      - hmmm what are those preference shares though? 

Oop forgot about the divi - is there one ? - yep 3.7% seems about right 

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tomps3 22nd Mar 9 of 27

Eagle Eye Solutions (LON:EYE) reported H1 results last week. Here's their results presentation.

A very clear presentation by by Tim Mason CEO & Lucy Sharman-Munday, CFO

Gives a great overview of the business. What they've already achieved. Where they’re headed. And how they're going to get there. With comprehensive detail on the financials at half year. The Waitrose contract sounds very positive.

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roger ashworth 22nd Mar 10 of 27

Graham, I would very much appreciate some comments on Sopheon. Although their results seemed quite good, they are now down 20%. Perhaps got ahead of themselves?

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aflash 22nd Mar 11 of 27

In reply to post #460833

Upcoming XLM Events
Tuesday 26th March, 2019
Full Year 2018 XLMedia PLC Earnings Release

This information is from the Stocko page. Go to the bottom left hand side.

XLM should provide some info next week and the SCVR people should comment.

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Graham Neary 22nd Mar 12 of 27

In reply to post #460918

Hi Roger, I plan to look at Sopheon (LON:SPE) today since the news is a little quieter (ignoring b*****).

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DJCP 22nd Mar 13 of 27

Debenhams (LON:DEB)

Possibly below the SCVR market cap limit, (and probably not the 'value' part either), but more news on an oft mentioned share:
"Debenhams seeks £200m in new funds"

A few RNSs too, regarding bonds and MAshley's offer for Magasin Du Nord, Debenhams' Danish business

Oh ! It's near-doubled since from today's low, so could be big enough now !

p.s. @purpleski (#6) - my name's not Debenhams ;^)

p.p.s. I'd like to add to other recent comments, in that although there's not been any/many shares in the SCVR that interest ME, the reports and comments have been very interesting TO me - Thanks P&G and Stockopedians (that could also be construed as a nudge for your thoughts on Volvere (LON:VLE) lol)

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sharmvr 22nd Mar 14 of 27

In reply to post #460918

That was my reading too - no further positive news since the update. Revenue visibility, recurring revenue, new clients all flat on previous update from a stock where market (expected and valuation demanded more.
I initiated a starter position recently, which is now underwater, but find it more attractive now than when I purchased
Growth/ new business I expect would be lumpy for a business such as this but did not see anything in the results that was concerning

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jonesj 22nd Mar 15 of 27

Thanks for the report on Volvere (LON:VLE) Graham. Are you suggesting the Volvere Landers move slowly ?
Fine by me as the last thing I want is management who cannot wait to throw the money at the first opportunity that comes along. I have a small position in this.

I did have a quick look at their property in Leamington via google. On an industrial estate, which I guess would be the old AP Braking site. Although it's opposite housing, I doubt the site could be developed for any non-commercial purpose.
[And google maps shows a Trabant parked on the drive of one of the houses opposite].

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Graham Neary 22nd Mar 16 of 27

In reply to post #461038

Hi Jason, thanks for the comment and insight. I am perfectly happy with the pace at Volvere - suits me fine. G

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roger ashworth 22nd Mar 17 of 27

Many thanks Graham re sopheon.

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purpleski 22nd Mar 18 of 27

In reply to post #460968


Gosh do I feel stupid.


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purpleski 22nd Mar 19 of 27

In reply to post #460838

Hi rmillaree

Gosh do I feel stupid.



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Camtab 22nd Mar 20 of 27

In reply to post #460848

Thank you rmillaree. The points you make are sound. I got the impression that the hits from the regulatory issues are now behind them but perhaps I am premature there. I like that they are refocussing on marginMy understanding is with a margin around 30% they have a moat . But I take your point and with aflash pointing out they will report on 26th I think i will adopt a wait and see policy. Thanks to both of you.

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mammyoko 22nd Mar 21 of 27

Re Churchill China (LON:CHH) vs Portmeirion (LON:PMP) - not an explanation just an observation - the former is primarily B2B the latter B2C. Portmeirion (LON:PMP) caters more to discretionary spend? Neither of these are good reasons, I admit. I have been a long-term holder of Churchill China (LON:CHH) and management are solid. But you have made me question my position!

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LongValue 22nd Mar 22 of 27

A possible takeaway from the Safestyle UK (LON:SFE) debacle could be the danger of investing in newly listed companies. As has been pointed out before, the promoters of these companies know far more about the nuts and bolts of the business than almost any private investor. They can choose their moment very carefully to maximise returns. I would suggest that it may make good sense to give these enterprises a grace period of, say, two to three years so that any skeletons can fall out of the cupboard.

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RichardK 22nd Mar 23 of 27

In reply to post #461093

Just to add to Mammyoko's correct observation:

Op margin CHH `15.2% PMP 10.7%
Net cash CHH £13.7 mn PMP -£ 1.25 mn

Data from Stocko. Could explain some of the higher P/E for CHH.

I hols CHH and am thinking about buying PMP again.

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eezymunny 22nd Mar 24 of 27

Love the comments about slow pace at VLE. I guess if buying IAL for £1.3m in March 2015 and selling it for £31m in Oct 18 is your idea of slow paced you have been smoking something extraordinarily good :)

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coniston 22nd Mar 25 of 27

Thanks Graham.
For sharing that stat that 40% of the S&P 500 will not be around in10yrs time, shows you that with technology change just how tough investing is,let alone trying to beat the market on a consistent basis.I've read hundreds of books & haven' once come across that. ,

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tightfist 24th Mar 26 of 27

Hi, thanks for the Sopheon perspective. I wonder if the share end 2017 share issue has caused some confusion. The 2018 Diluted eps was increased by 16% BUT the Basic eps actually declined by 6%.
I also need to re-read the comments on challenges hiring US software engineers - is overcoming this a cost hit or revenue opportunity for 2019??

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Bonitabeach 25th Mar 27 of 27
Scary prospect - "over 40% of companies on the S&P 500 will no longer exist within 10 years due to their inability to operate with agility and speed in today's hyper paced changing markets". If that's true, it shows the importance of finding companies immune from the disruption (or which cause the disruption!).

Even if it's only 30% this underlines the attraction of a tracker ETF like VOO where our abilities as the pickers of winners are not tested - decisions on promotion and relegation are out of our hands. The S&P 500 is up 50% in the past two years who among us can claim to match that?

I need to go away and have a serious think about what I have just written.


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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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