Small Cap Value Report (Mon 1 Mar 2021) - VTU, QTX, SDY, RCH, AUG
Good morning, it's Paul & Jack here with the SCVR for Monday.
Today's report is now finished.
Agenda -
Vertu Motors (LON:VTU) - 11 month trading update. In line with expectations.
Quartix Holdings (LON:QTX) - 2020 results. Nice company, but looking very expensive now.
Augean (LON:AUG) - FY 12/2020 results in line with expectations. HMRC dispute ongoing. Low PER.
Speedy Hire (LON:SDY) - ahead of expectations full year update from equipment rental and services company. (Jack)
Reach (LON:RCH) - print revenue down, digital revenue up, costs down, but lots of adjustments and moving parts to consider in this print-to-digital turnaround. (Jack)
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Paul's Section
Vertu Motors (LON:VTU)
(I hold)
39p (Friday’s closing price) - mkt cap £145m
Vertu Motors, the UK automotive retailer with a network of 147 sales and aftersales outlets, announces the following update with regards to the five-month period to 31 January 2021 (the "Period") ahead of its preliminary results for the year ended 28 February 2021 to be announced on 12 May 2021.
Trading Update: Trading in line with Analysts' forecasts
"I am pleased to report that the Board expect the trading result for the year ended 28 February 2021, at an adjusted profit before tax level, will be in line with current Analysts' forecasts of around £23m.
I’m not sure why Vertu has put out such a detailed update for 11 months trading? Companies normally do a full update like this at the year end, for 12 months trading.
I won’t labour on this update, as it’s in line with expectations. That’s encouraging to me, given the 5 month period includes 2 lockdowns.
Some noteworthy points -
Taxpayer support of £8.2m, which constitutes more than a third of the FY 02/2021 adj profit. It’s important to remember that, as support is phased out, companies will have to win more business to make up the shortfall. So we cannot just assume this is the low point for profitability. That’s a general point, not company specific.
Sterling has strengthened a lot recently. This is mentioned by Vertu as a positive, as it will make cars more affordable to UK buyers. This is also a helpful tailwind for other companies which import goods, e.g. eCommerce, retailers, etc.
Vertu has embraced an omni-channel sales approach, which I like. As with so many other areas, the pandemic seems to have accelerated changes to business models & consumer behaviour. There are even TV ads for new internet businesses (e.g. Cazoo) where you buy a new car online without even seeing it, and send it back if you don’t like it. Therefore traditional car dealers like Vertu need to keep up, which it seems to be doing.
Outlook - uncertain.
Expansion - VTU has 147 sites currently, of which 29 were added since 1 Jan 2020, so a good rate of growth. The sector looks ripe for consolidation.
Diary date - FY 02/2021 results due out on 12 May.
My opinion - I picked up a starter size position in this share earlier this year, as the last update seemed unexpectedly good.
Broker consensus is currently 4.98p for FY 02/2021, which is a PER of 7.8 - an attractive valuation, considering Vertu also has a strong balance sheet groaning with freehold property. As mentioned before, I see this, and some other car dealer shares as hybrids - part automotive retail, part property companies.
Many thanks to Liberum & Zeus, which have both published update notes this morning, available on Research Tree.
Forecasts for the new year look rather gloomy at present, and could be revised upwards once guidance is reinstated by the company, maybe?
Despite its attractive value characteristics, this share has been a poor performer over the last 5 years. Although divis have totalled around 6p over that period. Also note the consistently high StockRank, as denoted by it being in the green zone below most of the time.
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Quartix Holdings (LON:QTX)
476p (up 1.3%, at 08:41) - mkt cap £228m
Quartix Holdings plc (AIM:QTX), a leading supplier of vehicle telematics services to the fleet and insurance sectors, is pleased to announce its audited results for the year ended 31 December 2020.
Strong growth in fleet customer and subscription base
Here is my review of the previous FY 12/2020 trading update, issued on 13 Jan 2021.
Actual results - adj diluted EPS (my preferred measure) has come in at 13.16p, slightly above Finncap’s forecast mentioned in my last report, so that’s fine.
Dividends - as expected, a much bigger divi is declared, including supplemental divis, the total for the year is 21.07p, a yield of 4.4% if repeated. This has always been a properly cash generative business, which is a key reason why I like it.
Subscriber numbers - fleet subscription base is up 15.4% to 174k. The attrition rate is 12.2%. Therefore that seems to mean QTX started the year with 150,640 subscribers, added 42,898 new ones, but lost 19,745 through attrition, ending the year at 173,793 fleet subscribers.
Price erosion is mentioned, at 6.6% (improved from 9.4% LY). Put that all together, and it’s fairly modest revenue growth of 7.8% in fleet by my calculations. The company reports fleet revenue growth of 6.0% to £22.0m, so there must be some timing differences causing that difference, but it’s in the same ballpark.
Insurance telematics business is falling intentionally, as it’s low margin.
Put that all together, and it means total revenue is almost flat against last year at £25.8m. I appreciate that QTX is prioritising higher margin business over top line growth, but as mentioned before, it does concern me that the company isn’t really growing. Which makes me question the growth company valuation.
There are signs of decent international growth though (see RNS text), maybe that’s what investors are focusing on?
Outlook - this sounds promising -
Although the latest lockdown in the UK has had an adverse impact on customer activity in the first two months of 2021, we expect new fleet subscriptions to be close to the levels achieved in the same period last year, but with much stronger prospects for March.
The high levels of recurring revenues and opportunities to grow the fleet business in the UK, USA, France and each of our new territories underpin our confidence for the current financial period and beyond."
Sales & marketing spending is being cranked up in 2021 to drive growth, as the company has mentioned before, so not a surprise.
Balance sheet - this is a capital-light business model, with very little in fixed assets. Cash is £10.57m, with no interest-bearing debt (ignoring a little for IFRS 16 leases). Overall the balance sheet is strong, and combined with the cash generative nature of the business model, it just throws off cash, which can be used to pay divis and/or invest in growth.
Cashflow statement - very straightforward. A cash generative business that uses its surplus cash to pay divis. Note that there’s hardly any capex, and it doesn’t capitalise any development spending. Therefore, the accounting looks very prudent, which I like a lot. It’s always good to find companies that don’t need to dress up & adjust the numbers to create earnings, and accumulate surplus cash over time.
My opinion - there are lots of things I like about this business, but in terms of valuation, I can’t get anywhere close to the current price.
Finncap is forecasting 8.2p in 2021 and 9.2p in 2022, so that’s a PER of 58 and 52 respectively - way too high to make sense to me.
I suppose the bull case is that the company is driving future growth with higher sales & marketing spend, which should produce bigger profits in several years’ time. I’m sure that’s right, but why would I want to pay up-front for that growth? The market has effectively already priced-in a doubling of future earnings from the current level.
The 5-year chart is trending sideways. Breaking out now, but on a historically extremely high PER, so I question how much higher it can run? But we're in a bull market for growth stocks, for now.
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The StockRank system sums up Quartix perfectly -
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There are 3 short videos from Quartix this morning, which are helpful.
Here's the short summary from the CEO Andy Walters, an owner/manager with a large, albeit recently reduced, family shareholding (big tick in the box there) -
Click here for the other 2 short Quartix videos.
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Augean (LON:AUG)
215p (up c.6% at 12:55) - mkt cap £225m
Here are my notes from 18 Jan 2021, covering Augean’s trading update for FY 12/2020. I thought it looked good value at 13.7 times estimated 15.0p EPS.
Augean, one of the UK's leading specialist waste management businesses, announces its final results for the year ended 31 December 2020.
Adj basic EPS is 14.9p (down 3% on LY) - that looks in line with the 15.0p guidance given (near enough to make no difference).
HMRC - a material dispute over £40.4m landfill tax. Still not resolved, despite the first hearing being held in Sept 2020. There doesn’t seem much financial risk from this, as Augean has fully paid the tax which it believes to be wrongly assessed.
Outlook -
· Significant further growth targeted in the Group's core niche markets
· Strong cash generation - proposed return to dividend in 2021
· The Board is confident in the prospects for the Group
The Group has set ambitious internal targets for the 2021 year which will undoubtedly be an economically uncertain period for the UK whilst Brexit plays out and the impact of Covid-19 continues; however, with limited direct exposure to EU markets, coupled with a strong start to 2021 trading and a robust pipeline of activity, the Board remains confident in the Group's prospects for the new financial year.
Balance sheet - NAV: £61.0m, less intangible assets of £19.8m, gives NTAV of £41.2m. Overall, the balance sheet looks robust to me, and the cash pile more than covers interest-bearing debt.
Strikingly good cash generation, has allowed it to pay off a lot of debt in 2020.
My opinion - I’m always uneasy with this share, because I don’t know anything about the sector, and I worry about, hence rarely invest in anything that is regulated by Govts.
The HMRC appeal could go either way, so the outcome is a material known uncertainty.
I’m impressed with how Augean sailed through the covid year, with barely a scratch, despite its North Sea business seeing much lower revenues. That seems to suggest the core, waste disposal business looks resilient.
Thanks to N+1 Singer for making an update note available today on Research Tree. This shows decent growth in forecast EPS, from many new energy from waste plants in construction or planning.
I still don’t really understand how Augean manages to make such high margins, nor what regulatory risks there might be. The FY 12/2021 forward PER is only 12.4, which suggests there’s either something wrong, or the share is too cheap. I’m not sure which it is unfortunately! Overall, it looks interesting, and readers might want to research this further.
Jack's section
Speedy Hire (LON:SDY)
Shares price: 64p
Shares in issue: 527,014,028
Market cap: £337.3m
Speedy Hire (LON:SDY) is the UK’s leading provider of equipment hire and services to the construction, infrastructure and industrial markets. The hire and services business operates from over 200 locations in the UK and Ireland. It also operates internationally, providing equipment and manpower primarily for national government clients in the oil and gas markets, on long term framework contracts in the UAE and Kazakhstan.
As of FY20 about 91% of revenue came from the UK and about 9% came from International. International was more profitable relatively speaking, though, with a profit margin of 23% (helped in part by contribution from its Kazakhstan joint venture, whose share of revenue is not reflected) compared to just 3.4% in the UK. The prior year saw a 9.6% profit margin for the UK, which is perhaps more representative.
Trading update for the year ending 31 March 2021
The key points are that trading since 30 September 2020 ‘has been ahead of the board's expectations’ and Speedy has now sold its Middle East business for $18m. In fact, ‘profit before tax... is anticipated to be well ahead of current market expectations.’
Jumping back to the disposal, consideration was paid in cash in full on completion; in addition outstanding trade receivables from ADNOC of c.$12m are payable within 30 days. The net proceeds will be used to reduce borrowings, which, with net gearing previously at around 60%, was on the high side.
Looking at the balance sheet though Speedy’s cash pile has been slowly increasing and it carries some £332m of net plant, property and equipment (minus the £16m or so of net assets in the Middle East operations). Compared to total long term debt of £102m (excluding £52m of capitalised leases) that looks to be in hand.
Offloading c.600 UAE-based employees' should also usefully reduce the cost base. The group's International business continues to operate the Kazakhstan JV, which is performing in line with expectations.
Meanwhile, revenue has improved as activity levels have continued to increase across its markets. In February 2021, core hire revenue in the UK and Ireland was c.2% higher than the prior year and utilisation for the period 1 October 2020 to date is 58.7% (2020: 56.2%).
There has been no use of government furlough or loan schemes in the second half of the financial year, so it does look like an increasingly positive fundamental picture.
Conclusion
This looks interesting. The share price has already recovered well from the events of 2020 but momentum is to the upside and Speedy still looks modestly valued across forecast metrics.
It’s not a company I’ve looked at before, so if there are any holders out there it would be great to get your insight. There is a wider theme here of increasing activity levels - a cause for optimism, and certainly a useful tailwind for Speedy.
The exit from the Middle East operations looks like an important strategic step and should allow management to focus of the market opportunities in the UK and Ireland as activity levels continue to improve.
The group already supplies 87 of the UK’s top 100 contractors, so that’s a strong market position and it suggests Speedy does add value for its customers.
The balance sheet looks strong and it’s a cash generative business model.
Meanwhile, the valuations look modest. So it’s worth a closer look even considering the recovery in share price already, particularly if activity levels bounce back even further as economies unlock.
There are risks here as well. It’s a cyclical company with some big customers that could hurt performance should they move to another services provider in what looks like a competitive space. But the underlying direction of travel is undeniably positive for the moment.
Reach (LON:RCH)
Share price: 236p (-1.05%)
Shares in issue: 312,067,649
Market cap: £736.5m
(I hold)
Reach (LON:RCH) has had a tremendous six months of outperformance and is beyond the normal market cap range of the SCVR but it’s a story many are still curious about - including the Stockopedia Investment Club, which holds a position.
It’s a collection of regional newspapers that is pivoting to an online business model. But, while digital revenues are growing, the group’s (large) legacy print business continues to decline. Meanwhile there are costs from phone hacking scandals and six different pension schemes to consider.
So there’s quite a lot of moving parts and results are open to interpretation at the minute, with two divisions in different directions of travel and some financial risks to bear in mind.
How news is framed is unusually important here. Is the market focusing on declining print, or the promise of digital today?
Annual results for the 52 weeks to 27 December 2020
Highlights:
- Revenue -14.6% to £600.2m (digital of £118.3m up by 10.6% and print down 18.9% to £479.3m)
- Adjusted operating profit -12.8% to £133.8m,
- Statutory operating profit -94.2% to £7.6m,
- Ongoing reduction in cost base and growth in digital revenue supports 50bp increase in adjusted operating profit margin to 22.3%,
- Accounting pension deficit increased by £12.6m to £255.5m (2019: £242.9m),
- Adjusted EPS -12.7% to 34.4p; statutory loss per share of 8.6p,
- Dividend per share +70.4% to 4.26p.
- Strong adjusted operating cash flow of £121.8m with net cash balance at the year-end of £42.0m
That’s a huge gap between adjusted and statutory results. This is largely due to the delivery cost of Reach’s transformation programme (£36.4m), print plant closure costs (£48.4m) and commitments related to historical issues (£34.1m).
Statutory loss per share was further impacted by a non-cash deferred tax charge which relates to the reversal of a previously indicated reduction in the headline rate of corporation tax. The dividend of 4.26p is a yield of about 1.9%.
Lower print revenue was driven by a Q2 decline of 29.5% following the first COVID-19 lockdown but there has since been a sequential quarterly improvement in both advertising and circulation. Lockdowns probably helped digital over Q4.
The completed transformation programme enables annualised cost savings of over £35m from FY21, with additional annualised savings of £11m following Q4 review of print capacity leading to closure of 2 sites.
Over 10% of Reach’s digital users are now registered with the company and it has more monthly customers than any other commercial national and regional news publisher. Its online audience is behind only that of the global tech platforms in the UK.
In 2020 it delivered average monthly unique visitors of some 42 million per month - up 5% year-on-year, with better engagement metrics to boot.
The IAS 19 pension deficit increased by £12.6m to £255.5m. Contributions and asset returns were more than offset by a decrease in the discount rate and an update to the scheme demographic assumptions following actuarial analysis.
Group contributions in the year were £53.9m (2019: £48.9m).
That’s a big number, but bear in mind Reach generated net cash from operations of £53.2m after pension contributions, and the £21.2m of cash used in investing activities included a one-off deferred consideration payment of £18.9m.
So the underlying cash flows are still strong, but negotiations with pension funds are ongoing and this is still a key financial risk to be aware of.
Conclusion
Reach is good at framing its results in a positive light, but then again, there are definitely dynamics to get excited about.
Trading to date has been ‘broadly similar’ with Q4 2020 and performance is in line with management's expectations for the year. Digital revenue for the first two months grew by 20.4%, with revenue overall for the Group down 10.7%.
The group’s resilient print circulation funds strategic investment and future growth potential. It also maintains pension commitments and allows Reach to grow returns to shareholders. But the revenue at print does continue to decline.
Reach hopes to double digital revenues of £118m over the medium term. This favourable shift in revenue mix alongside annualised cost savings means adjusted operating margins should continue to grow.
Revenue in absolute terms, though, will likely fall for the next year or two and there is not as much detail into the actual economics of the group’s digital business as you might like.
So it remains hard to value, in my view, with attractive potential upside but also some financial risks and a delicate turnaround to execute. There is less of a margin of safety here than there was six months ago, and the market is clearly warming to the idea that this is evolving from a turnaround to a digital growth story.
But given where Reach is in that turnaround, I would consider it far more fairly valued at these levels. Of course, if it does really nail the opportunity in front of it then this could prove to be a far more valuable enterprise than current valuations imply, given the scale of its online assets.
All done for today, see you tomorrow.
Regards, Paul & Jack.
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69 comments
Reach (LON:RCH) (no position)
My issue with Reach is that the company doesn't make it possible in any form (that I have seen) to forecast what a digital only business would look like.
The information I would like to know is:
If the answer to both these questions is £303.2m and £244.6m respectively (as per the below), then I find it hard to believe that Digital Revenues will ever grow large enough to cover these costs.
I have found no reference to what constitutes Cost of Sales for this business.
A
good take on £RCH ...tho obvs the cost of sales should fall. However, the admin expense may not.
On mgt call today they said they are majority programmatic advertising (ie open bid market for space) at the moment and would like to move to higher margin ‘bespoke or in-house’ (can’t remember their terminology but you get what I mean). That’s interesting ...but leaves a question of do they need to invest in internal capability more to do that and how much extra revenue is to be had from switching say 50% to bespoke? And is it that there is just a lack of demand for bespoke and cos and their media buyer intermediates like the responsiveness and targeting of programmatic? Or is it the case that Reach space is rather low quality from ad $ perspective so will always be programmatic bias or lower margin limited direct promotional stuff?
I really don’t know. Questions rather than views.
Means the risk-price space is large both ways on this one
£RCH I saw the news that Google is phasing out cookies and dumped all my shares. I always shoot first and ask questions later. It may well be a mis-understanding on my part, but I thought cookies were a key element in online advertising. I never understood why Reach publications didn't ask me for my email address when I get directed to their web pages as I thought this was how they were hoping to generate revenue. Hopefully somebody will correct me on my misapprehension and I can get back in.
Abtan,
I couldn’t agree more with this comment. Reach (LON:RCH) started to be promoted (or at least came on my radar) last November. An increasing number of prominent investors continue to promote. Obviously, I made a bad decision not investing as the share price has done well.
The business case is just too confusing for me. There is a digital business that is growing. There is a legacy print business that generates the profits. There is a legacy pension deficit that has to serviced. All of these are actually easily quantifiable and manageable. But without knowing whether the business has potential as an actual standalone digital business how can any reasonable person invest here? I just don’t get it. But to be fair, I don’t get any of the digital stars either and I keep losing money as a result...
Their websites are just so poor. I may well be wrong and I doubt I am the target audience but given the investment surely there should be some kind of improvement? Not for me this one....
"I doubt I am the target audience"
I have the same sentiment posted on the wall behind my screens.
Such an important an investment consideration. Lots of companies massively coining it sell products I would not even look at.
I'm with Robert W here. Gromley. I honestly can't think of any other websites that give such a grotesque user experience as the Reach (LON:RCH) ones.
Yes, I may not be the target audience but I would suggest that The Sun is a direct competitor, and its on-line product is vastly superior to anything Reach has.
Reach (LON:RCH) I find their websites ok but I use Adblocker, so I don't see any of the awful adverts. I only visit them for local news, it is surprising how many of the local newspapers they own.
I'm not interested in the national news on their sites.
Reach (LON:RCH)
You say that all three elements are easily quantifiable. I disagree unless you're talking hindsight. The print profits are a race between reducing sales and cost cutting. Digital sales may be forecastable, but profitability is unknown. And the pension fund: we know how much they have agreed to pay, we have the artificial numbers around the deficit, but interest rates are unknown and every year that passes makes the change in the deficit more random as pensioner numbers reduce. For a long time the share price assumed no digital value. A cheap takeover of other papers would help, but the last lot were too expensive and there can't be many left. The share price varies; sometimes it's in fashion, sometimes out. Worth buying when it's out. Might be worth buying when it's in, but don't expect to find firm figures that will prove it.
After the close, Cloudcall (LON:CALL) comes back to the market asking for another £7m of equity capital (at 81.5p), including £1m via PrimaryBid. As £4.5m of the £6m regular placing will be EIS/VCT qualifying, I can only assume that there is not a large takeup from the US shareholders.
Cloudcall (LON:CALL) fundraising - not again!!! Checking my notes, the last comment here was on 22 Jan 2021, where I flagged that net cash had fallen to only £3.6m, and expressed my displeasure with the company's performance.
On the upside, the recruitment sector which CALL mainly serves, seems to be recovering well.
Guidance provided in today's RNS for 2021:
Additionally, the Directors are now confident in providing new guidance for the 2021 financial year (for the twelve months to 31 December 2021) and now expect to achieve revenues of £14.0 million, representing an approximate 18 per cent. increase on 2020 revenues.
Not bad, but not amazing either, considering 2020 was suppressed somewhat by covid.
Guidance for 2021 costs is also provided today:
The Company is also providing guidance for 2021 operating expenditure, which is expected to be approximately £16.9 million compared to 2020 which is expected to be approximately £13.9 million (including one-time COVID-19 related savings). More details are included in section 3 below.
I'm assuming we can deduct operating expenditure from revenues, so that would imply a £2.9m loss in 2021.
There's strong operational gearing here, with c.80% gross margins.
Longer term guidance:
Longer term, we continue to focus on achieving monthly EBITDA breakeven by mid-2023 and £50 million revenue run rate in 2026."
My opinion - it could have been worse, the main thing is that the 81.5p price isn't too bad a discount, once we ignore the obvious insider dealing that's been going on today!
Obviously CALL has been disappointing, that's why the market cap is only £28m.
Personally, I'm going to hold this one to the bitter end, more through stubbornness than any strong conviction. It's not a big holding anyway. I think one of the America funds bailed out, or reduced, Kinderhook.
XLMedia (LON:XLM) (I hold)
Up 25% as at 2.30pm - on no announcement and no news (that I saw).
Gratified that something I have has had a nice increase but,
There seems to be a lot of this happening at the moment (large price changes - mostly to the upside).
I have the feeling this is another "you should stat cashing up" indicator that is noticed, then ignored.
Hi andrewdb,
I also hold Xlmedia (LON:XLM) - According to SCSW (published on Saturday) "a French family fund has picked up a 21% holding". Perhaps this has something to do with it?
re: XLMedia (LON:XLM)
The French fund was announced a month ago so not that - more likely the SCSW write-up itself if it was good - the buying started at open - 40p by 08 10.
(If it had shot up with heavy buying at noon my bet would have been on Simon T!).
"...I have the feeling this is another "you should stat cashing up" indicator that is noticed, then ignored."
I hold 540,000 XLMedia (LON:XLM) shares @37.6p
I have not a clue why the spike today and last Thursday.
French "Premiere Asset Management" run by one of The Mitterand's are the usual big buyer accumulating.
No idea where this is going.
2,935,816 shares traded is a lot of action on the day.
Next FY Results should be mid April.
Why don't we coordinate? If I sell, the price will shoot up afterwards based on my recent performance. :-)
Hi Jack,
Speedy Hire (LON:SDY)
Thank you for your analysis of this company, which tends to be below the radar.
I bought into this company in August 2018 @ 59p. My reasoning was that it used to be badly run and in a critical situation following the discovery during the 2015-16 year of previous financial irregularities. Two chief executives were forced out and a former accountant was brought in to run the company. He succeeded in completely transforming its fortunes. He eliminated unnecessary costs and substantially reduced the bloated number of product lines, thereby greatly increasing asset utilisation. Efficiency was transformed and close attention paid to customers' sentiment and demands and also to sales and margins within individual product lines. The company's fixed cost base means that improved sales and margins can result in meaningful increases in profits,
As you point out, cash generation is high, and the company's balance sheet looks a good deal stronger than that of some of its sector rivals. This has been achieved despite some acquisitions.
I take your point about the possibility of some of its biggest customers moving to another services provider but, in my opinion, the trend is more likely to be the other way round for the reasons I have pointed out above.
I also feel that there is likely to be good growth potential in this sector and that this particular company is in an excellent position to benefit from this.
Just read this whilst doing some research before maybe buying Speedyhire. Very helpful indeed. What are your thoughts on the Gleason Training acquisition for £26m of Dec 2018 ? It seems to have been something of a disaster, with, it appears, the majority of that cost now written off. It doesn't reflect at all well on management and has destroyed a fair bit of shareholder value. Within months of the acquisition, the business was embroiled in an investigation by Ofsted.
I would be very interested in your thoughts David as it causes me to question managements strategy of adquisition, which was one of the stated benefits of the cv of the relatively new FD. Who, incidentally, has no industrial or construction experience at all, coming from a betting and travel background. All rather strange.
has anyone heard anything about a delay to paying the Tesco Special dividend which was due to be paid on Feb 26th ?
cheers
Tesco (LON:TSCO) Mine was paid on 26th February. Which broker are you using?
IG - i will get on to them - thanks Herbie
and in fact it has just arrived in my account now - March 1st though rather than the 26th Feb.
:-)
happy i am not having to phone them though as i was on the phone for 45 mins last time I had a query!
Same as Herbie - got mine from HL on the 26th.
Reach is a large pension fund with a newspaper business tacked on. Really need to analyse the age of these pensioners to get a grip on the risk of the pension deficit getting worse or better. Eventually they will die off and the deficit can be paid down.
Reach (LON:RCH) provide quite extensive detail on their pensions in both in today's report but more so in the full annual report when published.
It's all there for anyone that wants to dig further.
One point of particular interest perhaps at the moment is that changing the life expectancy assumption by 1 year moves the deficit by c. £150m. It does not look to as though any Covid impacts have been factored into the numbers at this stage.
Reach (LON:RCH) - old journos got to be boozers and smokers...so good for the pension deficit ;)
I listened to the call. I thought they were good on it and laid out what they've done and where they are going pretty well.
That said, I find placing a value/risk on it at current price hard. I think the case for meaningfully lower and higher can be made and I don't feel I can understand the operating trajectory over coming years to place myself on the spectrum. (This is probably just as my work has been quite casual)
I invested when it was lower and sold when it got to the 160p range as I felt quite similarly at that point as I do now (won't repeat my points but they are higher up near the start of the day).
My hunch is that what they are doing is so ambitious that I'll probably get a look in again in future with more information and a meaningful price wobble...not as the fail but just as they don't succeed enough.
I'd be interested in being put right though by fans...
In fact life expectancy assumptions at age 65 has increased by a few months surprisingly.
Lots of interesting moves today. Alternative lenders Amigo Holdings (LON:AMGO) and Non-standard Finance (LON:NSF) are well up, perhaps on views that the main banks are not keen on lending to retail customers with furlough expected to finally end in June. Card Factory (LON:CARD) and Works Co Uk (LON:WRKS) seem to go up in tandem. Might there be a deal on the way?
Recent IPO Wildcat Petroleum (LON:WCAT) leads the way today and may win the award of most ridiculous valuation of 2021.....so far. No assets, just 2 employees, around 1m in cash and approaching a £50million market cap. Up 1750% from the 0.1p IPO in December.
Great work if you bought in at the IPO. Not in a rush to buy today myself!
WCAT up over 40% today on the announcement ( only ) that they have appointed a Crypto Professor as a Blockchain Advisor !!!
Madness.
Card Factory (LON:CARD)
updated Re CARD factory, seems somewhat positive, less risk of a right issue possibly or not?
Stores opening soon in Wales and April respectively in England.
https://www.insidermedia.com/n...
Anybody know what's caused big Macfarlane (LON:MACF) price move today? Up nearly 10% (I hold). Sorry, edited, just seen there was an RNS that somehow I missed.
Macfarlane (LON:MACF) https://www.stockopedia.com/share-prices/macfarlane-LON:MACF/news/brief-macfarlane-group-says-unit-buys-gwp-for-151-mln-stg-urn:newsml:reuters.com:20210301:nASN000WA2/
Schroder Uk Public Private Trust (LON:SUPP) (no position)
Coincidentally I was looking at this, and Oxford Nanoprene (ON), on the weekend and came to the conclusion that at this very moment it wasn't for me.
Oxford Nanoprene
I read a few articles on ON with valuations touted as high as £5.1bn.
However, a bit of digging revealed that the valuation as of September 30th 2020, hasn't really changed over the last year.
I was quite surprised to see no movement between these dates given the growth in ON over the last year. One order alone from the UK government was £113m...revenue in 2019 was only £52m according to Companies House.
Immunocore
Where I did see some additional value was with Immunocore, another Schroder Uk Public Private Trust (LON:SUPP) holding, which IPO'd last month.
It's hard to work out the exact impact this will have on Schroder Uk Public Private Trust (LON:SUPP) 's NAV as they partially sold some of their holding in January 2021, but it's clear that it will be positive.
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I think the big thing for me when it came to Schroder Uk Public Private Trust (LON:SUPP) was that there are so many unlisted holdings which could bring their NAV swiftly down - I'm not too sure as I've never actually invested in anything with a similar structure before. There's lots of upside of course, especialy with something like Oxford Nanoprene, though I remain wary of the recent lack of change in valuation.
I may still open a position, but if I do it will likely be on upside I already expect within Schroder Uk Public Private Trust (LON:SUPP) .
Cheers
A
You're right, unlisted holdings are not for everyone, their illiquidity can present a significant risk and many funds are barred from holding them or are only allowed limited exposure. There are rules governing private equity valuations and as there is no real-time market the book values can get quickly left behind. I don't think that the stated revenues and profits can be used to increase valuations as they are not audited in the same way as listed firms. The most common method is the valuation at successive funding rounds.
Schroder Uk Public Private Trust (LON:SUPP) /Oxford Nanoprene (ON)
Hi Momoko
Understood regarding the book values only changing with successive funding rounds.
I guess my point was that ON revenues clearly increased quite materially in 2020 and there were 3 funding rounds in 2020 (the last one being in October), which current investors must have known about.
Given the above I'm surprised that Acacia Research valued ON @ £1.5b on September 30th 2020 - i.e. the exact valuation IP Group were assuming on January 2nd 2020.
Why did Acacia not increase their valuation? It signals to me that the 2020 funding rounds implied a consistent £1.5b valuation...unless I'm missing something, which I probably am.
I seem to be in the minority here though, so no doubt I'll come to regret not taking a position.
Cheers
Abu-chan
Schroder Uk Public Private Trust (LON:SUPP) is the inheritor of Woodford Patient Capital. I bought some last year on the entirely non-analytical basis that the justified stink from that affair was probably deterring investors and that there were some good companies left in the mix. The new managers seem to me to be doing a good job.
The same managers manage Schroder British Opportunities Trust (LON:SBO) that launched a couple of months ago. There was speculation that they might merge in the future once the Woodford legacy issues have been unwound in SUPP.
Here are my SCVR heat maps for today (prices as at ~10am).
Unfortunately my RNS source (InvestEGate) is playing up again today so I have no RNS information. Here are the Small Caps which have notified an intention to report / update today:
Big movers today in the SCVR world (moving more than a 20d EMA of the ATR against either yesterdays close, or today's open):
Warm regards, and best of luck!
greensiax
PS: See my main heat map thread for more (non-SCVR specific) heat maps, and keys to the heat maps contents
Stockopedia share prices are very misleading as based on the last trade rather than the bid or mid price. Really annoying when you look at your folio and it says shares are up 3 to 4%, when in fact they have not moved at all. If you have it set to bid price on your settings, then why use last price?
herbie47 Totally agree – I’ve ‘moaned’ to Ed & co about this a couple of times but no action to date.
For those who follow Sylvania Platinum (LON:SLP) the price quoted for Rhodium today on MetalsDaily.com has hit $28,000. The broker assumptions for the year to June 2021 (made in May and June 2020) were $5,694 (curiously precise) and $6,000.
No wonder the SP has done so well since then.
I hold.
The basket price they used in the presentation the other day was $3,800 or so, I calculated that at the prill they get it was ~$4,600 with a Rhodium price of $25K. Looks like the EBITDA forecast might need to go up...
Results out from Augean (LON:AUG) this morning. I picked this one up at the beginning of last year partly because it was number 6 in the list of most popular choices by subscribers in the 2020 Stock Picking Challenge. Price 222p at close 31/12/19 and just edging back towards that this morning.
The SR was 88 in Jan. 20 but is 18 now! It will be interesting to see how that changes with these results. The cash flow looks particularly good with movement from net debt to net cash. NTA increased from £28m to £41m. The big issue remains the outcome of the tax tribunal.
Augean (LON:AUG) (I hold)
Hi Sharw
I liked the results this morning.
CASH GENERATION
There are a few one-offs (eg tax repayment from HMRC, £3.5m VAT deferral), but even accounting for these, the underlying cash generation looks to be c £22m, a similar level to the previous year.
FUTURE OPPORTUNITY
North Sea Services revenues are currently about 1/3 of group revenues and the company continued its narrative that this would grow into its largest segment by revenue and profit. Perhaps I've missed the timeline before, but today they've given one:
"The opportunity remains for Augean to continue to service this growing North Sea decommissioning market, worth multi-billion pounds for many years to come however the group does not expect this market to pick up until late 2022 or early 2023...
Decommissioning is expected to grow to be the most significant revenue and profit generator in the coming years."
VALUATION
Current Market Cap is c£220m, which looks low to me given an underlying cash generation of £22m (in a bad year).
Receiving more money back from HMRC would of course boost the relative valuation, however, given the stage of litigation I imagine this won't be resolved for many years.
Afternoon sharw and abtan,
I agree with your assessments that the Augean results were good, especially considering circumstances such as the closure during lockdown of local authority waste to energy plants, disposal of low grade nuclear waste, construction waste, etc, and the big hit to the oil industry work which resulted primarily from the covid related slow down.
But I don’t read the bit about decommissioning in the oil industry as growing to be the dominant source of revenue for the group in coming years, I believe they mean that it will increase substantially and dominate the North Sea Services revenue.
Meantime the tax dispute is really five separate disputes, one of which is due for resolution by end of March this year, according to the accounts, with a value of £11m, iirc.
Augean (LON:AUG)
Hi Muckshifter
Thanks for the response.
That's an interesting point on the future ANSS decommissioning revenues/profits, I hadn't read it like that, so you may well be correct.
Not that it will change my position, and I hope you don't mind me asking, but how confident are you on this point?
Another point to add on the tax dispute for any interested...
By my rough calculations, if HMRC were to win their case, then Augean (LON:AUG) would also need to backpay landfill tax for 2018-2020 (which would be rubbish).
They would still be generating £15m cash flow per year at the current rates and to be honest I imagine that they will just increase their prices to bring cash generation back up again.
If you're still interested, there are 2 tax rates/ton for landfill waste (depending on how hazardous it is): £3 and £94.15 respectively (these are new rates from H2 2020).
HMRC are claiming that Augean (LON:AUG) should pay £94.15 per ton on ALL it's waste (so 570,000 tons in 2020), whereas Augean (LON:AUG) are saying that a material portion of their waste should only be taxed at the lower £3 rate.
Update on the Vertu Motors (LON:VTU) chart.
I previously posted on this share on Feb 5th, just as it was breaking out from the previous consolidation.
I personally have a position here, and see no reason to sell at the moment as price is holding the 21ema, with decent volume seen in the last couple of weeks.
Difficult to see a clean entry at the moment, but I'd like to see a run-up and consolidation at the previous high (around 43.6p on the ask), which has already acted as resistance once as price ran up rapidly after the breakout.
If we do get a base forming at that level, a break above could provide a good entry.
Potentially an important RNS for Water Intelligence (LON:WATR) this morning. [I hold].
https://www.investegate.co.uk/water-intelligence--watr-/rns/two-insurance-national-account-wins/202103010700086038Q/
Whilst adding yet another national insurer to its roster is obviously great news, it is the extension of an existing insurer relationship to cover repair work that is perhaps more significant.
Surprisingly, to my mind, the WATR franchise network was established to do detection work only - no repair. Some franchisees extended their scope to cover repair work, but this was not the core franchise offering.
Thus, extending scope from detection to repair gives the opportunity for material growth to come from within the existing franchise network. After all, who is the most natural choice of tradesman to repair your water leak than the one who has just detected it?
Hi Paul any chance of looking too at Centralnic (LON:CNIC) who have just reported great results?
Hi The skier. The thing that strikes me most about these results is the staggeringly large adjustments which Centralnic have applied to the basic EPS of -4.6 cents to arrive at an adjusted diluted EPS of +9.85 cents.
I would be interested in your thoughts re the quick Covid tests as they are being used to help open us all up again. Clearly there are going to be winners but is the price already factored in? The Times reckon we need 32million tests a week. That is huge. Has the market been focussing on the vaccine? Anyway we are going to find out over the next few weeks I guess. But this seems to me, alongwith the vaccine, the most pressing factor to individual company performance at the moment.
Take a gander at Oxford Nanopore, handheld DNA sequencing machines company that is itself revolutionary, coupled with a gov't approved COVID test (lampHORE i think it's called) that reports in less than an hour. Off the top of my head I think they've done 50m COVID tests worldwide.
Personally I would look right past the COVID story though, the ultra-fast handheld DNA sequencing story is looking like a step-change in genomics. The company is already valued at over a billion with investment from Singapore sovereign wealth and the Chinese investment bank.
The catch? Not publicly listed, yet. I hold Schroder Uk Public Private Trust (LON:SUPP) as a means to get exposure as the trust will likely rake it in in the event of the rumoured IPO going ahead. I have cashed out all my 'future tech' stories except this one; I studied a bachelors in Genetics back in the day and this tech knocked my socks off when I read about it.
Ps. Apologies if seems rampy, but COVD testing stocks are pure speculation in my book, whereas ON is a winning tech with a small COVID tailwind.
Ip (LON:IPO) (I hold) is a better way of getting exposure to Oxford Nanopore than Schroder Uk Public Private Trust (LON:SUPP) (I also hold). Ip (LON:IPO) has a market cap of c. £1.2B with at least £250M cash and owns 15% of Nanopore which could list for between £4.5-16B according to sources cited in the Telegraph on Sunday. I would argue these figures are conservative relative to the current market caps of illumina and Pacbio, Nanopore's competitors which arguably have less advanced technology. 2020 has seen Nanopore's commercial expansion plans turbocharged by the pandemic but the tech has almost endless medical and industrial applications beyond COVID-19.
IMHO Nanopore is the most exciting and globally significant UK company since ARM.
Great shout on £IP have picked some up this morning.
Agree on the global significance; amazing tech.
Re £Ip, thank you for that. Read up on the company - Oxford Nanopore - and it is a very impressive story. Do you have the report from the Telegraph on Sunday please?
https://www.telegraph.co.uk/te...
mistake, apologies
Schroder Uk Public Private Trust (LON:SUPP) doesn't own 18% of Nanopore, the holding represents 18% of portfolio value. Ip (LON:IPO) has a greater % of portfolio value represented by its holding in Nanopore. Both trade at a discount to NAV but in its favour Schroder Uk Public Private Trust (LON:SUPP) has a larger discount. I should also caveat that the management at Ip (LON:IPO) made a couple of appallingly timed disposals in 2020 namely AVACTA and CERES shortly before the SP of both went stratospheric. I'm hoping they learnt from their mistakes.
Both trade at a discount to NAV but in its favour Schroder Uk Public Private Trust (LON:SUPP) has a larger discount.
It was a darn site larger when I bought.
The discount is partly due to the Woodford connection and partly due to the eccentric array of investments assembled under his management. On the other hand the management do seem to be turning it around - I think they have something in the region of £130 million on the way in from various realisations, which should finally allow them to be a bit more proactive. I wonder what they'll do with Rutherford Health (OFEX:RUTH) though.
I hold both Schroder Uk Public Private Trust (LON:SUPP) and Ip (LON:IPO) FWIW.
timarr
Snap Timarr
I also hold both the Ip (LON:IPO) and £SUPP. My initial reason for investing was the comparatively sizeable portfolio holdings in Oxford Nanopore. As mentioned elsewhere in this thread, the gene sequencing technology of Oxford Nanopore has significant applications beyond Covid19. If the company decides to float it will be very highly valued. Given the recent share price appreciation of Ip (LON:IPO) there are some it appears who think that a floatation is imminent, time will tell.
Schroder Uk Public Private Trust (LON:SUPP) also hold some other interesting investments. You mentioned Rutherford Health, its largest holding, but it also holds some other interesting and potential valuable investments such as Immoncure and Atom Bank, of which I am sure you are aware.
All the best
thanks Momoko, yes realised my mistake so deleted the post, but all your additional info on both Schroder Uk Public Private Trust (LON:SUPP) and Ip (LON:IPO) is very helpful, thanks for the reply.
Mti Wireless Edge (LON:MWE) results out this morning with Revenues up 2% but EPS up 17% and divi up 25%. Commendable that audited results out quickly and Annual Report said to be available on their website later today. Looking forward to the presentation on Investor Meet company at 10:30 this morning for a bit more detail. I know it's an Israeli company but it has a large family holding and has been solid for many years. Interested in Jack or Paul's views. I hold.
What struck me in the numbers of Mti Wireless Edge (LON:MWE) (I hold) is the big jump in receivables, which meant the op cash inflow fell quite a bit. I hope this gets answered on the call.
Mti Wireless Edge (LON:MWE) (no position)
Hi Grumpy5
I only briefly looked at results this morning, but to add to your comment on cash flows here is a note I made to myself back in November 2019, highlighting similar worries on working capital movements:
"H1 UPDATE
They say cash flow is up, but I can see this is due to receivables down and payables up - don't like that cash flow shown as a positive"
I've been holding £MWE for a number of years from the low 20's and its part of my lock away and keep category. I did topslice some earlier this year as it was becoming quite big and I do think a lot of growth has been factored into the share price already. This is a long standing company with 51 years of existence (according to their report today) and is in three very different markets, of which two of them (5G and water preservation) are very interesting growth plays. This has led to the stock being a bit more volatile over the last 12 months but theirs no reason they won't continue there steady growth trajectory.
I also hold Mti Wireless Edge (LON:MWE) , the SP took off after Simon Thompson's IC tip last year and is no longer cheap but the 5G sales are just getting going and could be very significant to the business. The nature of 5G (shorter transmission range) means that a lot more towers (and therefore antennae) will be needed compared to 4G/3G. Mti Wireless Edge (LON:MWE) 2in1 5G antenna product is marketed as reducing installation cost and requiring less tower space. Although not formally announced the previous news suggests they have partnered with Nokia and therefore may benefit from the embargo on Huawei's products.
Equals (LON:EQLS) - New partnership with Tap Global announced to provide Crypto Currency exchange services.
Interesting development which the market seems to like looking at the mark-up for this mornings opening.
I'm quite curious to see how Reach (LON:RCH) reacts today.
Turnaround in progress with a lot of action taken....but is the price ahead of the turnaround? As ever in such a situation, reality is in the eyes of the collective beholders.
Some issues that cause dissonance:
Anyway, there's a lot to net out. There's also a lot of adjustments between statutory and adjusted numbers and some of the adjustments look more than one off in one year.
Hi Paul can you/Jack look at the 6 months' results from Reach (LON:RCH) Reach please?
Late Friday RNS from Directors selling a chunk of Springfield Properties (LON:SPR) on Friday afternoon. I hate these late RNSs.
https://www.londonstockexchang...
My morning smallcap tweet:
Speedy Hire (LON:SDY) Bango (LON:BGO) Fragrant Prosperity Holdings (LON:FPP) Sensyne Health (LON:SENS) Yourgene Health (LON:YGEN) Water Intelligence (LON:WATR) Kromek (LON:KMK) 1Spatial (LON:SPA), Vertu Motors (LON:VTU)
Speedy Hire (SDY) guides FY(Mar) pretax well ahead of market expectations. Feb core hire revenue in the UK and Ireland up 2%. [SP=64 Cap=338m]
Bango (BGO) CFO resigns, will remain as consultant. She is thanked. [SP=206 Cap=154m]
Fragrant Prosperity (FPP) £540k placing at 5.25p, an 8.5% discount, for additional capital for its investment strategy. [SP=6 Cap=3m]
Sensyne Health (SENS) SYNE-COV algorithm for COVID risk prediction has achieved regulatory approval and is now able to market SYNE-COV across the UK. [SP=165 Cap=262m]
Yourgene Health (YGEN) wins first US contract worth an estimated $1.5m over five years for non-exclusive access to Ranger Technology. [SP=16 Cap=117m]
Water Intelligence (WATR) two insurance national account wins. [SP=559.84 Cap=86m]
Kromek (KMK) wins 2 repeat orders worth a total of $750k, half recognised this FY. [SP=17 Cap=59m]
1Spatial (SPA) guides FY(Jan) ahead of market expectations with rev over 24m and adj EBITDA over £3.2m. [SP=32.6 Cap=37m]
In line: Vertu Motors (LON:VTU) I hold