Small Cap Value Report (Fri 8 Dec 2017) - CER, XAF, PRV, PCF

Friday, Dec 08 2017 by

Good morning,

This is the placeholder article, but I'd also like to draw your attention to my recent interview with Cerillion (LON:CER), which was originally published to subscribers on my mailing list but can now also be found on Stockopedia at this link.

It's a software company which I had already covered a little bit in the SCVR, before realising that the opportunity to interview management would present itself. It's got a StockRank of 90 and a PE ratio of c. 14-15x. So I hope this interview might be of interest to some of you.




Xafinity (LON:XAF)

  • Share price: 183.6p (-1%)
  • No. of shares: 137 million
  • Market cap: £251 million

Proposed acquisition of Punter Southall

Interim Results

This is a mid-tier, domestically-focused pensions consultancy. It listed earlier this year, and this is the first time I've looked at it. Thank you for suggesting it in the comments.

Checking the shareholder register, there are some big names in the investment industry backing it up.

Yesterday it announced interim results and a very big (£153 million) acquisition.

The deal, assuming it goes ahead, will consist of £92 million in cash and up to 32 million shares, along with the sale of an HR trustees business worth £8.5 million.

To find £92 million in cash, Xafinity wants to raise £70 million in New Money and increase its debt facilities.

Its total (gross) debt at end-September was £29 million, offset by some cash. It is now seeking to increase debt facilities to provide a maximum of £80 million in borrowings.


The target company is another mid-tier provider of institutional investment advice, so the rationale is as you would expect:

We believe that a successful combination of these two premier mid-tier providers would create the pre-eminent mid-tier firm in the pensions consultancy market, with significantly stronger growth prospects than each business would possess individually.

The "big 3" firms in the space are Willis Tower Watson, Aon Hewitt and Mercer. So the questions now are (1) will Xafinity be better-positioned to compete with them? (2) what about the XAF shares?

Current Trading at Xafinity is fine, with revenues up c. 2%…

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

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Cerillion plc is engaged in providing billing, charging and customer relationship management software solutions to the telecommunications market but also to the utilities and financial services sectors. The Company is a supplier and developer of telecommunication software solutions and equipment. It operates through four business segments, such as Services, Software, Software-as-a-Service and Third Party. The Services segment provides services to customers on new implementation projects and enhancements. The Software segment supports and provides maintenance for the software, as well as the licenses to use the software. The Software-as-a-Service segment offers monthly subscriptions for a managed service and products on a pay as you go service. The Third Party segment offers third-party services or licenses, and includes re-billable expenses and pass through of selling on hardware. It operates in Europe, the Middle East and Africa, the Americas and Asia-Pacific geographical markets. more »

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XPS Pensions Group plc, formerly Xafinity plc, is a United Kingdom-based holding company. The Company is engaged in pensions actuarial, consulting and administration business. The Company is engaged in providing a range of advisory and compliance services to over 550 pension scheme clients. The Company offers solutions for pension trustees and sponsoring companies. The Company’s Pensions Advisory and Administration business provides advisory services to the trustees or sponsoring employers of approximately 450 defined benefit (DB) schemes in the United Kingdom, covering actuarial, investment and pensions advice, including in respect of defined contribution (DC) schemes in the United Kingdom. It administers, advises and acts as investment consultant to its DC Master Trust platform called the National Pension Trust (NPT). It provides, operates and administers Small Self Administered Schemes (SSAS) and Self-Invested Personal Pensions (SIPP). more »

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Porvair plc is a specialist filtration and environmental technology company engaged in the development, design and manufacture of filtration and separation equipment. The Company's operating divisions include Metals Filtration and Microfiltration. The Metals Filtration Division designs and manufactures porous ceramic filters for the filtration of molten metals, principally aluminum. The Microfiltration Division designs and manufactures a range of filtration equipment for application in aerospace, energy, bioscience, water and industrial applications. It is developing a range of products, including the products for the manufacture of turbine blades, solar panel manufacture and energy storage. It operates Microfiltration division through its subsidiaries, Porvair Filtration Group, Seal Analytical and Porvair Sciences. It operates Metals Filtration Division through its subsidiary, Selee Corporation. It has plants located in the United States, the United Kingdom, Germany and China. more »

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

18 Comments on this Article show/hide all

MrContrarian 8th Dec '17 1 of 18

My morning smallcap tweet:

Porvair (LON:PRV), Angle (LON:AGL)

Porvair (PRV) trading - FY earnings will beat mgmt expectations.
Angle (AGL) University of Southern California has shown Parsortix liquid biopsy can detect metastatic breast cancer from a blood sample. "Angle is working towards an FDA clearance of the Parsortix system in metastatic breast cancer with the required analytical and clinical studies targeted for completion by 30 June 2018. ANGLE is seeking to become the first company ever to receive FDA clearance for a medical device to harvest cancer cells from patient blood for subsequent analysis."

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Ramridge 8th Dec '17 2 of 18

Hi Graham - re. Cerillion (LON:CER) a very good constructive interview - thanks.
I took an initial holding the day the results were announced and following your review. One thing to mention which I am not sure you have covered. Around 30-40% of the shares are held by management and in particular the CEO (30% of shares). With a total market cap of only £40m, it means liquidity can be an issue. For example yesterday the sp dropped 6% on very little volume and no news.

An afterthought. Nowadays I prefer a podcast to reading text. So if you going to interview and write it up, there would be little additional overhead in recording your interviews and publishing them as well (or instead of?) . You can glean a lot more information from a podcast than you can from just reading the material.

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runthejoules 8th Dec '17 3 of 18

Morning Graham, as it's slow today I was wondering if you could have a look at £XAF's fundraising for an acquisition - I don't know much about the pensions sphere. Or did Paul cover it yesterday after hours? Can't see a link on the right to yesterday's SCVR. Thanks for Cerillion (LON:CER) interview, listening now.

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Zoiberg 8th Dec '17 4 of 18

In reply to post #251068

I went to a presentation about two or three years ago where Angle's CEO said that FDA approval was expected shortly. They are very good at getting academic support. Commercial breakthrough seems much more elusive.

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ajbowden 8th Dec '17 5 of 18

Hi Graham
If you have time can you cast your eyes over the FY results from PCF (LON:PCF) released on Tue.
First benefits coming through of the cheap funding resulting from the banking licence.
Market appeared to expect more but underlying result was good and cost of funding much reduced.

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JimMcLad 8th Dec '17 6 of 18

In reply to post #251068

AGL will complete 2 major trials by mid 2018 which should lead to FDA approval later that year. For an update on the company see

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Graham Neary 8th Dec '17 7 of 18

In reply to post #251093

Hi Ram, glad you enjoyed the Cerillion (LON:CER) interview. Good point re: liquidity.

We've tried audio and text versions before, if you prefer audio then I will pass on that feedback to the team behind the scenes.



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Graham Neary 8th Dec '17 8 of 18

In reply to post #251113

Hi rtj, nice request re: Xafinity (LON:XAF). Covered it for you. You're welcome on Cerillion (LON:CER).

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brucepackard 8th Dec '17 9 of 18

Yes. Just on intangibles....I have started on this book about the shift in developed economies away from investing in tangible assets to intangible assets. Capitalism without Capital: The Rise of the Intangible Economy

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runthejoules 8th Dec '17 10 of 18

In reply to post #251223

Thanks Graham. It did seem a bit ambitious for Xafinity (LON:XAF). Think I will stick with Personal Group (LON:PGH) in that financials sector, having bought the dip earlier this year. Nice regular div there.

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matylda 8th Dec '17 11 of 18

Thanks for the updates Graham, wishing you a great weekend.

I am sure someone has actually checked Paul is well?

Blog: Briefed Up
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cholertonandrew 8th Dec '17 12 of 18

Yes, also hope Paul is ok. Normally he checks in even if it’s late in the day.


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Graham Neary 8th Dec '17 13 of 18

In reply to post #251143

Great suggestion aj, I've covered PCF (LON:PCF). Cheers

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fwyburd 8th Dec '17 14 of 18

In reply to post #251243

He tweeted 13 hrs ago so I'm guessing he had a late night (well late for me, I'm normally in bed by 9pm).


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fwyburd 8th Dec '17 15 of 18

Very quiet day today here.
So a final reminder that my report into how investors view the trading platforms is here
Do 'like' it if or join in the extensive conversation there - there's 38 comments about investor experiences to read as well. 
have a great weekend


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ridavies 8th Dec '17 16 of 18

In reply to post #251068

Always interested to hear your comments. Why do you think that £AGL's SP is not consistently driving ahead; it is up and down like a yoyo and that is on the basis of what is really a very small investment on a daily basis - may be £100k? I think that it is a grat story; it is fantastic that there may be a very accurate system of non invasive biopsy and seemingly now predictive directional recommendations for specific individual treatments. It is developing a good range of marketing associates, and as someone said recently, the latest - Philips - could buy it with pocket money. Why am I not filling my boots when I feel so positive about it? Its because I have bought 3 times at what I thought was going to be a reasonable price only to see the SP fall sharply, as I say often after only small volume sales. Any further thoughts, because I am poised to make another perhaps emotional into the shares which are currently sitting with me at a significant loss. i feel hurt as much as anything else! anything! I think there is a strong possibility of a takeover, but perhaps the restricted SP is based on the lack of information about how the revenue flow will pan out. Will it be sold on a system basis, or on a licence basis with future - and much more profitable - royalties per use? Do you have any further information on that, or where that information may be sourced. Perhaps a good target interview for Paul to have an interview with the CEO. After all, he has had them with companies with what I feel have far less potential than this one. What do you think Paul? Hopefully yours!

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ridavies 8th Dec '17 17 of 18

In reply to post #251173

Thank you very much for the reference to the presentation by Angle (LON:AGL) management. However, and there were unfortunately no follow up questions on the subject, there was no reference as to how the revenue would come in - a licence basis or a licence basis plus royalties or a licence plus royalties and also sales of the patented cassettes. I hope I am making myself clear, because the revenue implications on the choice of the sales system will be huge. Colgate for their razors etc have built huge profitability on the sales of repeat blades. It would be reassuring if the senior management were clearer on how the revenue stream would be based. Thoughts anyone?

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JimMcLad 9th Dec '17 18 of 18

In reply to post #251473

I could have written part of your post myself - I bought in 9/14, 2/15 and 3/15 before I read somewhere you don't buy the initial story but wait until you can see definite progress. FWIW I bought again 2 weeks ago because I feel the potential is now enormous. If you wish to find out the likely sales strategy (I don't know) I'd suggest you e-mail Andrew Newland the CEO. I've contacted him in the past re the FDA approval and received a fairly quick response.

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 Are LON:CER'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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