Small Cap Value Report (Mon 15 Jan 2018) - CLLN, SPSY, CAR, CMCL, JDG, WJG, SAL

Monday, Jan 15 2018 by

Good morning folks,

Looks like it has been another interesting morning for updates.

I'm looking at the following:

This list is provisional. I'll see how things are going as the morning/afternoon progresses!

Also, Paul has written an article discussing how MiFID II has affected him. It's available here:



Carillion (LON:CLLN)

  • Share price: Suspended.

Compulsory Liquidation of Carillion

Putting this here as a full stop for the story, which has reached its conclusion as far as shareholders in the construction support services group are concerned. It had about £900 million in financial debt through 2017, plus a £700 million pension deficit.

Late on Friday evening, an RNS informed us that the company was "in constructive dialogue in relation to additional short term financing while the longer term discussions are continuing".

It was completely out of cash, and needed new funds just to keep the lights on.

The lenders weren't willing to provide such funds, and the gap was too large to be plugged by fresh equity. So as of this morning, the shares are suspended.

Honestly, I'm a little surprised that the end came as abruptly as it did. It looked like there was going to be a conversion from debt to equity, along with a fundraising, so that existing shareholders were reduced to a token percentage holding.

Instead, existing shareholders will be reduced to zero, and the company will cease to exist in its current form. Employees, creditors and customers (including the Government) will need to figure out what happens next for them. The Construction Enquirer (external link) reports that work has temporarily stopped on "scores" of Carillion's former projects.

Pensioners will move to the Pension Protection Fund, meanwhile, which looks like it will be able to take care of most of their entitlements, particularly for those who have…

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

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Carillion plc is an integrated support services company. The Company operates through four business segments: Support services, Public Private Partnership projects, Middle East construction services and Construction services (excluding the Middle East). The Support Services segment includes its facilities management, facilities services, energy services, rail services, road maintenance services, utilities services, remote site accommodation services and consultancy businesses in the United Kingdom, Canada and the Middle East. The Public Private Partnership projects segment invests in Public Private Partnership projects in the United Kingdom and Canada. The Middle East construction services segment includes its building and civil engineering activities in the Middle East and North Africa. The Construction services segment includes its the United Kingdom building, civil engineering and developments businesses, together with those of its construction activities in Canada. more »

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Spectra Systems Corporation provides technology-based security solutions. The Company operates in three segments: Authentication Systems Group, which captures the hardware, software and materials related to banknote, tax stamp and other high value goods; Secure Software Transactions Group, which provides an internal control system (ICS) software offering to the lottery and gaming industries, and Banknote Cleaning Group, which captures the technology related to cleaning soiled banknotes. ICS provides tools for fraud detection, money laundering, match fixing and statistical analysis. The Company develops and sells integrated optical systems across a spectrum of markets, including currency manufacturing and cleaning, branded products, industrial logistics and other highly sensitive documents. The Company's solutions include engineered materials, sensors and quality control equipment. The Company's materials are available in several forms, including particles, threads, inks and coatings. more »

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Carclo plc is engaged in the supply of fine tolerance, injection molded plastic components, mainly for medical products. The Company is also engaged in the design and supply of specialized injection molded light-emitting diode (LED)-based lighting systems to the automotive industry. The Company operates through four segments: Technical Plastics, LED Technologies, Aerospace and CIT Technology. The Technical Plastics segment supplies fine tolerance, injection molded plastic components, which are used in medical, optical and electronics products. The LED Technologies segment develops solutions in LED lighting. The Aerospace segment supplies systems to the manufacturing and aerospace industries. The CIT Technology segment manages its digital printing of conductive metals onto plastic substrates. The Company is a supplier of control cables in Europe. more »

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51 Comments on this Article show/hide all

deltrotter 15th Jan '18 32 of 51

Attraqt anyone (LON:ATQT) Founder and CEO stepping and trading in line with expectations.

I think it was called "uninvestable" by Graham or Paul when it warned last October.

Hmmm, I hold and they could be right. But, maybe, just maybe, it is now simply too cheap, particularly bearing in mind it is focused on site search for online retail websites.....

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Steves cups 15th Jan '18 33 of 51

In reply to post #298043

Spectra Systems (LON:SPSY) issued a rns in October I think regarding if I recall correctly licensing their technology for
K-cup coffee type portions to be used in machines.

Happy holder at present but the shares are extremely illiquid so waiting for the 2017 preliminaries which should push the price up again. Be interesting to see the actual profits made as all the talk is of revenues.

Does anyone know a source of FY17 and FY18 forecasts

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Paul Scott 15th Jan '18 34 of 51

In reply to post #298263

Hi deltrotter,

There is a problem with  ATTRAQT (LON:ATQT) . Its original software is a plugin which helps improve eCommerce websites. It improves the customer search results, and hence increases the conversion rate of people browsing to actually buying.

However, the problem now is that a lot of eCommerce companies which have built up their own bespoke systems are now moving to third party software with all-singing-and-dancing features. Thus making ATQT's plugin redundant.

So the risk is that ATQT could now almost be seen as being in run-off, with customers gradually melting away as they upgrade their systems to newer ones which don't need ATQT any more.

For that reason, and that ATQT has never achieved profitability, I think it looks a very weak investing proposition.

Regards, Paul.

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Paul Scott 15th Jan '18 35 of 51

Hi Graham,

Thanks for your thoughts on Carclo (LON:CAR) . I've also checked it out, and jotted down the following brief notes, taken mainly from the last results, interims to 09/2017, and of course from today's statement, plus a broker note that I got hold of this morning;

  • Looks attractively priced on a PER basis
  • Revised forecast for 03/2018 is EPS of 9.0p
  • Last reported balance sheet showed high net debt, at £29.6m at 30/9/2017
  • Pension deficit of £29.8m at 30/9/2017 (was £51.3m a year earlier - suggesting that it's a very large scheme, subject to big swings in valuation of liabilities)
  • Debtors looks a bit high on balance sheet.
  • Gross bank debt high at £48.9m (less cash of £19.3m)
  • Cashflow not great, and capex-hungry.
  • No dividends.

So on this basis, I declined to catch the falling knife this morning - mainly as I don't like the combination of heavy debt/pension deficit, and declining performance. That's a pity actually, as it's bounced very strongly from earlier lows this morning of 67p, to 83p now. That would have been a nice little trade, but never mind - these things are impossible to predict, because it's down to decision-making of existing shareholders. It would only take one big holder to get cold feet & dump aggressively in the market, and the price would have carried on falling.

Margins in the supercar lights business look excellent - maybe this business would be worth more on a standalone basis?

Best wishes, Paul.

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tabhair 15th Jan '18 36 of 51

I have some thoughts regarding ATTRAQT (LON:ATQT), unfortunately they are not positive.

After the company took over Fredhopper, it gave guidance of £14.7M in combined revenue for the full year of 2017. Today's top line number for the period is in line with the previous warning of a ~10% decline in that revised guidance (i.e. £13.5M). Given that the Attraqt core business did £3.6M in revenue for 2016, and Fredhopper did £11.1M (remember that Attraqt have only owned this business for 10 months of that year, so recognised revenue is more like £9.3M for the same period). Combining those two numbers gives us £12.9M that the combined Attraqt entity would have done in 2016 on a pro forma basis. If these numbers are correct, then the revenue number for 2017 grew by less than 5%, which is much less than 22% growth that the company did in 2016.

Paul has suggested that there is a problem with competition here, and going by the numbers and the resignation of the founder, that is my thought as well. When you look at the 2017 interim which states the company had an exit run-rate of £16.5M (based on June revenues of £1.375M) and H1 revenue of £5.5M, and you consider FY revenue is £13.5M, you can extrapolate that the month-on-month growth in the run rate has stopped, and actually looks like it's in decline. June run rate for revenue was £1.375M - if the company had 0% growth since June, they should have done H2 revenue of £8.25M. Instead revenue was only £8M, which says to me that the revenue run rate provided in ther interim was nonsense. Indeed, my extrapolated H2 numbers would back up Paul's point that the business might actually be shrinking at this stage, or at very least not growing.

Now that the founder Andre Brown is down to a 3% stake in the business and given the challenges here, it's not at all surprising that Nick Habgood with his 18% stake in the business has taken the reigns here. The only positive I can think of here is that Habgood is savvy in the tech sphere, so with him in charge, he might have contacts in the industry that can buy out Attraqt. It's clear they have a good product, but I am wondering would it be more useful as a bolt on acquisition to a larger player in the e-commerce world than as an independent player?

While I am at it, one more point. At the last interim (June 30th 2017), cash was at £2.7M. As of September 30th, the company reported £2.3M of cash. As of January 12th, the cash position was described as being over £2M. This isn't good for a company that is no longer growing, or even worse, showing negative growth.

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deltrotter 15th Jan '18 37 of 51

Thanks guys - appreciate your replies on Attraqt.

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Funderstruck 15th Jan '18 38 of 51

Re Carillion (LON:CLLN)
Hopefully the current activity will save the individual parts of this important but poorly run company , the UK cannot afford to lose the skills existing throughout the firm. Fortunately I was alerted to the dire situation 18 months ago via a financial magazine report; which raises the question ' why, as it was so obvious, was it allowed to blunder on for so long' ; as It played such an important role in our infrastructure.

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daveinthelakes 15th Jan '18 39 of 51

Another Great British invention/technology.......going......going........gone!

Manchester University was the place where graphene technology was developed, a world leader, Cambridge University has also moved graphene development forward , now Versarian are "giving it away" to the Chinese.

Versarien plc - Planned Chinese graphene manufacturing facility

" Versarien will provide its intellectual property (IP) on a licensed basis together with production know how"

"It is the Company's intention to form a wholly owned Hong Kong company which will become one of the joint venture partners, whilst ensuring the strongest protection of its IP"

Anyone believe the Chinese won't nick the technology?

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Redrichmond 15th Jan '18 40 of 51

In reply to post #298228

Good luck to them. Burford are still the big hitters by a long way with lots of ongoing cases and growing like crazy. Burford were flat for 6 years from 2010 -2016.

With the cloak and dagger nature of law theres no way to know what your investing in with Vannin Capital or BUR.

It could go up and then flatline for years like BUR, who knows. I wish legislation would allow the full disclosure of litigation funders name in cases at least you could work out the win ratio.

Burford results in March , expect another bumper year for 2016 and hopefully same of the same..

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GN100 15th Jan '18 41 of 51

Hi Paul & Graham, Late RNS out this evening from Taptica Taptica International (LON:TAP) - I hate those out of hours late RNS's, especially the Friday night ones.

Would you care to give your thoughts - it seems like more dilution and an SP fall to me?

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JohnEustace 15th Jan '18 42 of 51

In reply to post #298378

I hold a little Taptica International (LON:TAP) and don't have a particular issue with the RNS - in the end it will depend how wisely they use the funds raised for further acquisitions, but I agree it likely won't help the SP short term depending on the price they get in the book build.

Regards the timing, I would prefer all RNS's like this were issued after 16.30 rather than 7.00 the next morning as it gives us more time to absorb them, but perhaps not on Fridays. Maybe the book build will be done by the morning.

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JohnEustace 15th Jan '18 43 of 51

In reply to post #298363

Bear in mind that the majority of disputes are settled before they get to court, so even with disclosure at the court stage a lot of the data would remain confidential.

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Gromley 15th Jan '18 44 of 51

Re : Carclo (LON:CAR)

While the FD leaving is not a red flag on its own, the timing is perhaps unfortunate.

Sorry Graham, but I think that rather misses the point  - the timing is very appropriate imho. The management team's credibility is badly damaged as far as I am concerned.

The November statement seemed 'optimistic'  - we badly missed H1 but we will do so well in H2 that we'll still be on track.  Oh wait what they actually said was "Solid first half trading overall with, as previously highlighted, an outperformance by LED Technologies offsetting a weaker performance by Technical Plastics" - except that the outperformance patently did not offset the weakness, resulting in the H1 miss.

Two months later the super H2 has proven to be a mirage. I really think there is a good business in here, but they just seem to "accident prone", so perhaps a refresh of the entire management team would be no bad thing.

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hayashi22 15th Jan '18 45 of 51

Yes the ceo of Carclo has to be on notice. The context of the Carclo warning is appalling and quite frankly amateurish.Get bad news out ASAP is the best policy.

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Intravnus 15th Jan '18 46 of 51

In reply to post #298268

Steve’s Cups, re Spectra Systems (LON:SPSY), I understand from hearing the views of one of the larger investors in the company that what most excites them is the commercialisation of “Trubrand” technology as first highlighted in an RNS in July 2017. A couple of extracts:

“...approval for the use of Spectra's TruBrand(TM) materials on tobacco products sold in China has been granted. The approval was issued by The Tobacco Standardization Research Center (CTSRC) in Beijing to one of Spectra System's potential customers. This potential customer had applied for the approval, and remains interested in using TruBrand(TM) materials on their products....”

“...This approval of Spectra System's TruBrand(TM) materials should open the way for production testing and commercialization of this breakthrough smartphone technology....”

“...Assuming this approval is granted to other applicants, which the directors believe is highly likely, then other manufacturers of tobacco products in the People's Republic of China will also be able to test and potentially commercialize the technology. Further updates will be provided, as appropriate...”

Clearly nothing has emerged since then but I assume getting deals done of this nature takes time.

Together with the coffee lids technology it seems there are several strands to SPSY technology apart from banknotes.

In addition, the company has committed to a substantial dividend annually so there is good yield (subject to USA withholding tax).

It does seem that the CEO, Dr Nabil Lawandy, is the brains of the outfit and much depends on this man. That is often true of small tech outfits though.

Disclosure, I hold a good few of these in my ISA.

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Bushranger 15th Jan '18 47 of 51

In reply to post #298408

Re Taptica International (LON:TAP). Raise/ book builds are announced after hours if it is expected to be completed overnight. this prevents the need to suspend the share which would most likely happened if it had been announced in the morning.

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xcity 16th Jan '18 48 of 51

In reply to post #298313

The ATTRAQT (LON:ATQT) RNS today is an interesting non-statement. Avoided saying much except indicating revenue. My interpretation is that AB was pushed; the October update was with a new FD & my guess is that a long hard look has been taken at future profitability and decisions have been taken about change. Small number of very large holders now who will be looking to salvage what they can - mostly bought in much higher. Probably no bad thing that management will change, just as it was no bad thing that Wagner lost his effective control. Can't say it looks like a good investment though, unless you know what the prospects actually are.

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gus 1065 16th Jan '18 49 of 51

In reply to post #298378

RNS that Taptica International (LON:TAP) have completed their placement at £450p (vs. Share price at close of 495p) per share overnight. Seems they placed all the shares being sold by existing shareholders and just under (4.85m) of the 5,000,000 new shares being offered.

This company was on my watch list to buy but I think I’ll hold off for now. Seems the directors are taking a fair amount of cash out of the company and not buying into the placement; demand for the new shares was at quite a big discount and even then insufficient to fully clear the market for the new shares to be issued that they had indicated in last night’s RNS. I’m slightly sceptical the placement was more about the directors creating a smokescreen to take cash out than raise funds for investment/debt pay down that the company needs.



Taptica International Ltd

("Taptica" or the "Company")

Closing of conditional Placing to raise £38.2 million

Taptica (AIM: TAP), a global end-to-end mobile advertising platform, today announces that further to the announcement made on 15 January 2018 regarding the proposed placing of new shares of NIS 0.01 each in the capital of the Company ("Ordinary Shares"), the Company has conditionally placed 4,850,000 new Ordinary Shares ("Issue Shares") at a price of 450 pence per Ordinary Share, raising gross proceeds of approximately £21.8 million ($30 million) through an oversubscribed placing (the "Placing"). The Issue Shares represent approximately 7.73% of the Company's current issued Ordinary Share capital (excluding dormant shares).

In addition, MTD PTE Ltd, a company controlled by Hagai Tal, CEO and Director of Taptica, and held in trust (the "Selling Shareholder"), and Smart and Simple Ltd, a company controlled by Ehud Levy and held in trust ("Smart & Simple"), have informed the Company that they have successfully placed 1,650,000 and 2,000,000 existing ordinary shares in Taptica respectively (together, the "Sale Shares") at a price of 450 pence per share. The Company will not receive any proceeds from the sale of the Sale Shares by the Selling Shareholder or by Smart & Simple.

Completion of the Placing and sales is expected to occur on 22 January 2018, subject to admission of the Issue Shares to trading on AIM ("Admission").

finnCap Ltd ("finnCap") and Joh. Berenberg, Gossler & Co KG London Branch ("Berenberg") acted as joint bookrunners to the Company and the Selling Shareholder. Berenberg acted as sole bookrunner to Smart & Simple.

Following completion of the Placing and the sales, the Selling Shareholder will hold 8,903,125 shares in the Company. Mr Tal, through his direct and indirect holdings, will be the beneficial owner of 9,375,509 ordinary shares representing 13.88% of the enlarged issued share capital of the Company. Mr Tal has agreed not to sell any further ordinary shares for a period of one year after completion of the Placing.

Following completion of the Placing and the sales, Smart & Simple will hold 4,517,625 shares in the Company. Mr Levy, the ultimate beneficial owner of Smart & Simple, will be the beneficial owner of 4,990,009 ordinary shares representing 7.39% of the enlarged issued share capital of the Company. Smart & Simple has agreed not to sell any further ordinary shares for a period of 90 days after completion of the Placing.

Hagai Tal, CEO of Taptica, commented:

"With a broader footprint across the globe and consumer mobile usage and adoption rising, we anticipate our strategy of on-boarding local advertisers onto global platforms to result in continued growth. The funds raised will reduce the level of debt under the Company's existing debt facility, which we believe will better position the Company to capitalise on near-term M&A opportunities. We thank our existing shareholders and welcome new investors to our share register and look forward to updating them on our progress."

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herbie47 16th Jan '18 50 of 51

I had a small holding, sold out this morning. I'm not happy the directors are selling loads, if they are selling then so am I. Will watch from the sidelines.

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Ramridge 16th Jan '18 51 of 51

Re. Taptica International (LON:TAP) At the time of this note, you can pick up TAP shares @450 , the placing price for institutions, roughly 10% discount.
Yes, I agree that the placing looks as if it was primarily for the directors to cash in. But Tal's total holding comes down from 11m to 9.4m shares, and Smart & Simple 's total holding comes down from 11m to 5m shares. So Tal still has significant skin in the game.
The extra cash could also be earmarked for further acquisitions.
IMO the risk/ reward ratio @450 a share is favourable. I picked up a good chunk this morning.

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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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