Small Cap Value Report (Fri 9 Sept 2022) - ASC, XPF
Good morning, from Paul.
I don't know what to say this morning, as our head of state has died.
Let's take a moment to collect ourselves.
Moving on, I'll take a look at Asos ASOS (LON:ASC) a bit later.
Also, an opaque update from XP Factory (LON:XPF) (I hold)
ASOS (LON:ASC)
688p - mkt cap £785m
FY 8/2022.
If you can make any sense of this waffle, then good luck to you -
ASOS today issues an update on trading for the 12 months ended 31 August 2022.
Full-year sales, adjusted PBT and net debt are anticipated to be in the range of market expectations1. However, after having seen good growth in June and July, sales in August were weaker than anticipated. This reflected the impact of accelerating inflationary pressures on consumers and a slow start to Autumn/Winter shopping.
Profit is anticipated to be around the bottom end of company guidance, with constant currency sales growth of c.2% and net debt c. £150m2.
While ASOS remains cautious about the outlook for consumer spending, it continues to make strategic progress and manage the business for the current environment.
ASOS will report full-year results on 12 October 2022.
1 Company-compiled consensus as of 15 July 2022 for 12 months ended 31 August 2022
· Total Sales Growth in the range of 0.3% to 6.3% [Consensus: 3.2%]
· Adjusted PBT in the range of £9m to £43m [Consensus: £28m]
· Net Cash / (Net Debt) in the range of (£235m) to £101m [Consensus: (£77m)]
2 Company Guidance issued as at 16 June 2022:
· Constant Currency sales growth in the range 4% to 7%
· Adjusted PBT in the range £20m to £60m
· Net Debt in the range £75m to £125m
My opinion - the Sunday Times seems to get better guidance than the market. We’re told that c.£4bn revenues, and something around breakeven might happen.
It looks a bit of a shambles to me, and I’ve heard bad things about ASOS internally - for many years - that internal cliques are disorganised. That’s probably why it’s never made any free cashflow or paid out divis.
Mind you, £4bn revenues means a lot of leverage if markets turn positive.
Associated British Foods (LON:ABF) looks tons better, on a PER of 10. Why waste your time on ASOS?
XP Factory (LON:XPF)
(I hold)
I think this is a really interesting format. The attraction is that it's getting great deals on new sites, for innovative competitive gaming formats - which landlords really like, and prefer to conventional cocktail bar type operators.
The trouble with the update today, is that it's so vague, I've read it 3 times, and still can't work out if it's good or bad.
Which tends to lead me to believe that the PR & BS factor is rather too prevalant maybe?
So I'd like to see some harder numbers before investing any more money here, beyond an initial starting stake.
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59 comments
Quite simply THE Queen
Deliberate capitals
Paul, just wondering if you read the Restaurant (LON:RTN) HY update earlier in the week.
I've never been a big fan and to be clear I am short Restaurant (LON:RTN)
The management seem to pick and choose their measures in order to make the headlines look good. For example EBITDA (adjusted) is their main measure and they seem to adjust out costs that relate to an increase in inflation - isn't this a real cost of doing business?
Whilst they have doubled sales vs HY21 this is not surprising due to the covid lockdowns last year.
Their adjusted EBITDA measure gave a profit of £41.7m but the reality was a loss of 3.4pence per share (pre-IFRS16).
Their whole update seemed to be a contradiction of figures and whilst reading between the lines they have managed to hedge their power costs for next year they are also calling out the risks around consumer spending.
Anyway, the markets seemed to like it, but I am not so sure, but maybe that's just bias due to my short.
One to keep an eye on I think. Especially if we keep having these bounces which seem to be occurring regularly.
All the best.
I am long Restaurant (LON:RTN) from 40p conversely. It is a well run business (now - terribly run in the past and shorted a lot around the time of the wagamma acquisition which was ludicrously priced) and they had already told the market they are well hedged and have now fully hedged utilities up to end of 2024 giving certainty on a big outgoing. i'd expect to see this back to 60p sooner than later barring any more major negative consumer news.
We've published a load of interesting results presentations this week.
£ACRL FY22 presentation incl Q&A. In spite of enormous headwinds which have hit margins this year they have grown sales impressively and the margins will recover next year. They have not lost a customer even though we know the multiple retailers are super aggressive. They have remained focussed on their strategy. They’ve engineered products to hit price points and lots of new products which have impressive market share already. The wipes growth is dramatic and future potential for this £50m revenue. To protect margins going forward, they have index link pricing with customers and shortened quote times. They've invested in the factory to make it super-efficient through machinery to save labour costs, increased shifts and energy efficiency, so their operating costs are much lower. Their own paper mill is still to be built but they are patient till construction costs come down. What they’ve achieved in the period in spite of the hideous macro backdrop is impressive. Video & podcast.
Headlam (LON:HEAD) H1 presentation and Q&A. They have seen a slight downturn in revenue £323.8m (21: £329.9m) but increase in margin to 33.7% (21:32.7%). PTP was very healthy at £21.6m (21: £14m) the out performance due to an insurance claim. They are executing well on their strategy to expand the trade counters, to get in with house builders and supplying major retailers. They are in line with expectations for the full year. Chris Payne appears to be doing a great job as new CEO. Video & podcast.
Pebble (LON:PEBB) H1 presentation and Q&A. They are making great strides forward. Overall revenue up 29%; Brand Addition +29% and the Facilisgroup +32%. Facilisgroup is their SaaS platform connecting their customers and suppliers, giving £7m recurring revenue and 100% gross margin! They upgraded expectation in August, and now confirm the FY22 will be 'at least' in line with upgraded expectations. Video & podcast
Windward (LON:WNWD) H1 presentation. Windward IPO'd in December. They offer maritime predictive intelligence, to trace the transit of goods on containers. ACV grew 23% to $22.5m - this is a key indicator of future revenue growth. Revenue was up by 34% to $10.9m. Gross margin maintained at 72.4%. Adj EBITDA loss higher than expected at $5.4m due to higher costs to support customers including travel and accommodation. Cash $27.8m. They tell us they continue to execute their growth strategy as planned. They're launching Ocean Freight Visibility a solution to address supply chain challenges, with 12 new clients signed up. They've also launched API Insights Lab to integrate the Windward platform directly into customers internal systems. Video & podcast.
Here is Quixant (LON:QXT) H1 results presentation with Q&A given to analysts. They are returning back to form with a significant growth in Gaming and Densitron revenues driven by buoyant customer demand. Densitron achieved its highest revenue since acquisition. A recovery in gross margins with a levelling off of component prices. Triple digit profit growth and improved margins. Balance sheet is always very strong here, even with increased working capital to increase inventory to handle supply chain issues. They have good order visibility of H2 2022 and H1 2023. First order for their new turnkey Gaming cabinet solutions. Demand is buoyant to achieve upgraded (July) full year expectations. Video & podcast.
First post above is Accrol group (LON:ACRL) for some reason it didn't hyperlink and I'm too late to edit now
I guess the Best Of The Best (LON:BOTB) purchased is pitched to be just under the takeover threshold.
That suggests sellers and the buyers and still see upside value (though largely they have significantly sold down at £4.00), but arguably it is now a strategic player with the incumbent CEO and associates in the minority in terms of shareholding. The investor will have two non exec positions, and the rights to sell etc the competitions in overseas markets.
For a while the UK market will continue to dominate results, but if the investment/rights to sell abroad are successful there will undoubtedly a stage 2. Taking a positive view it gives Best Of The Best (LON:BOTB) extra muscle in new markets, but it also does say that for the time being the incumbent management are less in charge of the future direction of the business, having done a significant cash out.
What this means for incumbent shareholders will only unfold overtime, I guess.
I hold.
I'm hoping your mention of Associated British Foods wasn't sarcasm Paul, we bought more yesterday as I couldn't see why it was hit so hard with many of its divisions going well. We'd parked some money in ABF before Putin's invasion as a safe haven but I'm afraid it was bad timing.
I love the royal we! ;-)
Not sarcasm at all - PER of 10, surplus cash, price dominator, I love Primark. Just not sure about the food business it's muddled up with. What's ur view?
The food business is arguably the better quality part of ABF (high margins and ROCE). Some good brands with pricing power, which did particularly well during the pandemic. The sugar part of the business also acts as a good inflation hedge. Some argue that the food business alone is worth current market cap, so you're effectively getting Primark for free.
My wife has always been our admin department Paul, she logs into Barclays Smart-investor for me too! You know the part in the vows taking one's partner For Richer For Poorer? It's being tested to the downside right now but we'll be celebrating our 60th wedding anniversary this December, my wife has staying power. :-)
Re ABF, I like the two totally different strengths, there have been plenty of analysts pushing for them to spilt Primark off but I doubt that will happen while Primark keeps growing. I noted ABF might consider returning surplus cash to shareholders, I think that's more likely.
It's not clear to me from some of the news items whether higher energy prices and/or the stronger dollar are disproportionately impacting Primark (which accounts for 40% of Associated British Foods (LON:ABF) sales) or other parts of the business.
Sad news indeed, and an end of an era. New PM and head of state within days of each other. A lot of change and uncertainty. Good to distract ourselves with a look at stocks though. On that note Gear4music Holdings (LON:G4M) trading update today with a profits warning. SP down 11% at the moment. Share price down 87% in 12 months. Suppose it depends if you believe in the power of online retail in the long term. One thing I recall is the value of assets which provides some safety, and the fact that it's a well managed company. Think it's a cautiously good entry point myself for the long term and would appreciate others views.
I have just increased my holding in Gear4music Holdings (LON:G4M) on the price drop. As you said well managed, cannot see musical instruments going out of fashion.
Blowing your own trumpet?
Gear4music Holdings down from almost 1000p just 12 months ago to 117p today (102p first thing!). Both sets of numbers mad.
Long term the music market is very solid and moving online. £G4M is a UK sector leader and early online mover in Europe, has good links with big brands and a big suite of its own label sorted out. Its inventory wont age much so I expect some sales weakness before recovery. It will come back but will never make high margins since it is mostly a distributor.
I hold and am considering buying more, with a long term price target somewhere inbetween 102p and 1000p!
Accepting anecdote isn’t data. This past week I’ve bought a cornet and a flugelhorn. I wasn’t at all impressed by the g4m website or offer. And that’s why, as the Dragons say, I’m out.
Interesting! I'm a trumpet player myself so would be interested to hear your feedback as I'm on the market for a new horn
At the price point I wanted to pay (around £1-1.5k for each) the fluge options were very limited. And at the top end they're out of stock, not that you would buy a £2k+ horn online without blowing it anyway. To be fair, fluges are a bit niche though. I ended up getting a Ray Farr flugel, made around the corner from the first house I bought. The kicker for me on that was they would let me have it on trial for two weeks, so I can practise at home, take it to lessons and band and really give it a workout. I've got an ex display one but the reviews and feedback about them are great. I'm meeting the actual guy who made it when they hand it to me.
For cornets, a much more popular instrument, they have a lot of options at the bottom end but not much beyond the Yamaha 4000 series. I have a 4000 trumpet, looking for something better for my cornet. Currently have a Weril which I was sold rather than I wanted, if you get what I mean. It's fine, I wouldn't get another one, I just don't have the confidence with it that I do with my Yamaha though the person who sold it stated it was a far better quality instrument. I should've listened to my gut, it reallly isn't. Though again I guess one wouldn't want to pick up a couple of grand piece of kit without blowing it. Haven't made my mind up what to do about the cornet. I might stick with the one I've got but, probably unreasonably, I just don't feel good about it.
Also G4M don't state where the instruments are made. And, probably not woke, I'm a bit worried about getting something Chinese, I prefer something that I know isn't ripped off someone else's design. I'm a bit anti that sort of thing. I would rather pay a bit extra and give the people who did the original the money (only get legit copies of CDs and things, don't bit torrent etc).
Trent Hamilton gives a good impression of a few horns, I guess I need to see which ones are in my price point and not knock offs.
Thanks so much MJP - great insight on instrument choice and Gear4music Holdings (LON:G4M) from a consumer perspective
I might not be their core market though, which is why I said this is anecdote not data :)
By the way, got the Fluge handed to me earlier; it's unbelievably impressive, beautiful to look at, sounds amazing and really easy to blow. I hate my cornet even more now :D I've put a bid on a Yamaha 6000 series cornet on an auction site. Fingers crossed I win that.
XP Factory (LON:XPF) I thought the same, really liked it at first then but BBB Cardiff seemed a little pricey at £2.3 million with £200k profit before tax and the £25.3 million target looks a bit challenging when they only have £8 million revenue in so far. Christmas party season coming up though which is a great time if year for Escape Hunt and BBB
Good news that Escape Hunt margins are actually higher than expected
i suppose when you look at how much money J D Wetherspoon (LON:JDW) is losing they are doing amazingly in the current climate.
hopefully a clearer picture at the end of the month.
"A fuller update on trading and prospects will be given with the Company's unaudited interim results for the six months to 30 June 2022 which are expected to be published in the week beginning 26 September 2022."
Went to an excellent J D Wetherspoon (LON:JDW) pub on Poole Quay, yesterday. Could not believe how cheap the prices are. £1.45 for a pint of Ruddles bitter !! Amazing value, especially as the pub has a large outside area, right on the seafront. On this evidence, cannot understand why people would have a pint at normal pub prices !!
LON;£JDW
Tax Equality day 2022.pdf
They announced this today aswell.
7.5% off for one day 15th September
Re 'Spoons -
On this evidence, cannot understand why people would have a pint at normal pub prices !!
I could answer that, but would probably "offend" the usual professional offenderati!
It's all about whether you want to pay £2.29 for a pint, and sit with a load of smelly tramps, or whether you'd rather relax, and pay £6.50 somewhere with a view and some sunshine, and not have to hold your nose!! ;-D LOL
Great humour love it!
Dear oh dear. LOL They're not all that bad but I agree putting the prices up at least a bit would seems a no brainer.
Well I suggest you pop over to Poole Quay and have a pint:). No tramps and beautiful fresh sea air !!
Yesterday , we were back in Richmond drinking at the Barmy Arms . We certainly thought it was well described when we were presented with a bill of £11.50 for two pints !!
XP Factory (LON:XPF) presumably the £200,000 gross profit excludes the £382,000 it pays in franchise fees so profit to xpf would be £582,000. You could argue they would get this franchise fee anyway, but not if the franchisee were to stop operating.
They've previously said they'd only accept franchisees in premises where they themselves would be happy to operate. Especially in circumstances like this.
If even the normally glass half full Paul is negative on ASOS (LON:ASC) then its maybe time to take a look.
Who's left to sell? Obviously almost anything can go to zero but how much worse can it get with shipping costs down almost 50% in a year, cotton and oil down around 30% from the peak. Its heavily shorted also. Im not surprised trade was down in August, you only had to turn the tv on for 5 minutes to be told no one has any money, inflation is going to 18% and energy bills will be 6 or 7 grand next spring.
Will soon find out if the price cap has had any effect in the October results. Im not rushing in to buy right now but its looking interesting at this price.
To be fair, gringo, I have pointed out for about the last 20 years that ASOS (LON:ASC) doesn't actually generate any cashflow at all.
Could you please comment on the Best Of The Best (LON:BOTB) announcement at 16:30 yesterday Paul ?
I'm still digesting the Best Of The Best (LON:BOTB) announcement. What do you think?
I had to google Globe Invest Limited and Teddy Sagi, now I know he is behind Playtech (LON:PTEC) and Kape Technologies (LON:KAPE) so quite a big player. My understanding is that Best Of The Best (LON:BOTB) will now start to do business abroad whereas currently they are just UK...so first impressions are it looks decent ?
I bought at around £2 yonks ago and sold in the mid £20's then bought back at £6 so will continue holding...
Our hearts hurt for her loss. God bless her.
I might have already mentioned it, but a connected party is now up to 29% on Fulcrum Utility Services (LON:FCRM) (I hold) - it's an interesting special situation I think, after a refinancing. Worth a look.
Between Harwood and Bayford they now hold c57% of shares in Fulcrum Utility Services (LON:FCRM) Maybe Harwood picks up another 3% and that makes a roumd 60%.
Any risk of a delisting? How many votes would they need, 75% in total?
Harwood doesn't tend to overpay. They sometimes take things private at a cheapo price.
That's my worry. They force a delisting by virtue of having 60% of votes backing it, causing the SP to crash, and then "offer a way out" for minority shareholders to sell at say c.6p a share.
Good morning Paul,
I think we all have to deal with these things in our own way, there is no right or wrong, as someone else said i too am surprised how sad i feel this morning but i will continue to work as normal as it helps keep my mind off the terrible news.
RIP Ma'am.
I too have been taken aback by the strength of emotion at her passing.
It’s humbling to have witnessed somebody dedicate their entire life to the service of others.
Yes, I agree. Instead of wallowing in TV emotions, I decided to <Do something> last night - namely washing the dogs in the shower cubicle, as suggested by readers here (or was it somewhere else on the internet, I cannot remember?)
They were totally perplexed at this new experience, then realising they couldn't escape from the shower cubicle, it continued largely without incident. Paddy (one of my dogs) did decide to collapse theatrically (he is 16, so it's allowed), and be slithered about instead of walking, and as usual vigorously resisted any attempts at bottom hygiene. Apart from that. pretty good! Too much information probably!
Honestly the things I have to do in between trading updates, you wouldn't believe LOL!! ;-D (basically dogs, and lots of poo)
P.
Glad Paddy is still with us, since his issue some time ago, meant to ask but always to afraid to.
Must be time for another picture of him along with his sibling (but not in the shower please!)
Could we have a photo of the dogs?
Regards
Michaels
Bloody love this. Keep up your fantastic work Paul. It’s hugely appreciated
Queen Elizabeth II was such a remarkable lady. We'll never see the likes of her again.
We'll never see the likes of her again.
Who knows, we might do?
To see the effect she had on Foreign Leaders, you can watch this one-minute video
Trudeau mourns ‘one of my favorite people’ Queen Elizabeth - YouTube
I'm in my late 50's. I was mostly in Australia during the 70's, and a bit too young to appreciate the political landscape in the UK at the time. But I am aware of a time of great strife for the nation. The 80's saw a great change in this political landscape. So politics and Britain changed a lot during the Queen's rule.
Someone came up with a surprising statistic. The Queen has been a monarch for 70 years. The US obtained independence in 1776, 246 years ago. So the Queen has reined the UK for about a third of the time that the US has been independent.
Mark in the same vein Seldon pointed out on Sky this morning that her first Prime Minster, Winston Churchill, was born in 1874 and he new people who born in the 18th century. The depth of experience that the queen has been able to absorb over her 70 years as monarch, and pass on the PM’s who followed Churchill, is pretty extraordinary.
Queen Elizabeth, we will miss you deeply. RIP.
"her first Prime Minster, Winston Churchill, was born in 1874 and he knew people who born in the 18th century."
This would appear unlikely given that the life expectancy on being born in the UK in 1800 was just 39 years!
Life expectancy is an average for all lives. Life expectancy in the 19th century was far lower than it is today because of the high rate of infant mortality. Of course it is likely that Churchill as a child met a few 80 year olds.
Queen Victoria was 81, so it is possible that he knew people of that age,
And our Queen has met and charmed more than a quarter of all American Presidents that have ever been elected.
Good Morning Paul, personally I think you've said it all, and hope we can all step back from everyday life today.
God Bless Her Majesty.
Long Live the King.
Hi Paul, Let's all take a break today. Look after yourself. Charles
(on a personal note, I am walking with Tom for Zane, not today, but doing 8 of his 14 x 10 mile walks)
Well done Charles! Send my love to Tom, Jane, and the rest of the ZANE sponsored walking team. Wish I had some more cash to spare with you all.
My regular STO is small, but it keeps going!
Best wishes, Paul.
I'm actually surprised at just how sad I feel. An icon in every sense.
I know, it's strange isn't it. But I refuse to go into some weird mass frenzy, like 1995 - grotesque actually,
I've had a good long chat with the older family members though, and made sure they know we're thinking about them.
Here here.