Small Cap Value Report (Mon 29 Jan 2018) - STHR, UTW, CVR, FISH, SPE, CLLN, ANP, YU., ITM

Monday, Jan 29 2018 by

Good morning! 

Thank you for suggestions, which I will prioritise for coverage.

There are a lot of updates today, so I may need to be selective.




  • Share price: 368p (-1%)
  • No. of shares: 132 million
  • Market cap: £485 million

Final Results for the Year ended 30 November 2018

Mentioning this international STEM recruiter only briefly, for two reasons.

1) It doesn't get requested very much, and 2) its market cap is now pushing the limits of what we tend to cover here, after a strong share price performance over the past year.

I covered SThree a few times last year, and my overall stance on it hasn't changed. I think it's a very well-run international business with attractive geographical diversification and an excellent track record of profitable performance.

Today's results show further progress in the strategy to limit Permanent hiring activities, while expanding the more reliable Contract-based activities.

It's more and more international, as 81% of gross profits are now derived from outside the UK.

Some people might be reluctant to invest in this sector due to low margins and its hyper-competitive nature, and I can understand that position. But for an investor who does want to get involved in recruitment, I think this should be one of the first stocks they look at.

The algorithms are impressed too, giving it a StockRank of 97.


Utilitywise (LON:UTW)

  • Share price: 41p (suspended)
  • No. of shares: 78.5 million
  • Market cap: £32 million

Temporary suspension of share trading

I haven't studied this utilities consultant in any detail before, as my modus operandi is to find things that I might like to buy shares in, and there were more than enough red flags to keep me away from this.

On Jan 17th, Paul highlighted (actually he put it in bold) the risk of the company failing to get its July 2017 accounts published in time to avoid suspension. It was an important warning for anyone holding these shares, as that is indeed what has happened.

Prior to suspension, Utilitywise was trading on an official PE ratio of 5x, but it was no bargain. The algorithms on this website had correctly, I think, identified it as a Value Trap.

The big accounting problem…

Unlock this article instantly by logging into your account

Don’t have an account? Register for free and we’ll get out your way


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

Do you like this Post?
93 thumbs up
1 thumb down
Share this post with friends

SThree plc is an international staffing company, which provides specialist recruitment services in the science, technology, engineering and mathematics (STEM) industries. The Company provides permanent and contract staff to sectors, including information and communication technology (ICT), banking and finance, life sciences, engineering and energy. The Company's segments include the United Kingdom & Ireland (UK&I), Continental Europe, the USA, and Asia Pacific & Middle East (APAC & ME). The Company's recruitment brands include Computer Futures, Progressive Recruitment, Huxley and Real Staffing. The Company's other brands include Global Enterprise Partners, Hyden, JP Gray, Madison Black, Newington International and Orgtel. The Company delivers contract, permanent, projects, retained and executive search recruitment solutions. Its support and mobility services offer contracting, relocation and relevant visa support. It provides resources to support its brands with contractor services. more »

LSE Price
Mkt Cap (£m)
P/E (fwd)
Yield (fwd)

Utilitywise plc is a United Kingdom-based business energy and water consultancy. The principal activity of the Company is of an intermediary for energy supplies to the commercial market. Its operating segments include Enterprise and Corporate. The Enterprise segment is engaged in energy procurement by negotiating rates with energy suppliers for small and medium-sized business customers throughout the United Kingdom, the Republic of Ireland and certain European markets. The Corporate segment is engaged in energy procurement of larger industrial and commercial customers, often providing an account care service and offering a range of utility management products and services designed to help customers manage their energy consumption. It provides energy management services, including procurement, energy reduction and audit, carbon offsetting, smart metering, water brokerage, design, manufacture and supply of timers, controllers and building management systems, and the Internet of Things. more »

LSE Price
Mkt Cap (£m)
P/E (fwd)
Yield (fwd)

Conviviality Plc is a United Kingdom-based distributor of drinks and impulse products serving consumers through its franchised retail outlets or through hospitality and food service. The Company's activities consist of the wholesale and retail distribution of beers, wines, spirits, tobacco, grocery and confectionery within the United Kingdom to the on-trade and off-trade market. Its Conviviality Direct is an independent wholesaler to the on-trade, serving over 23,000 outlets from hotel chains to food-led pubs. Its Conviviality Direct brand includes Walker & Wodehouse, Catalyst PLB, Peppermint Events and Elastic. Walker & Wodehouse focuses on supplying wine merchants and regional wholesalers with products and producers as part of wine portfolio. Catalyst PLB brand is the agency brand and supply solutions division. Peppermint Events delivers event concepts and bars at outdoor events. Elastic is a brand activation agency that provides support and insight to the Company's supply base. more »

LSE Price
Mkt Cap (£m)
P/E (fwd)
Yield (fwd)

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

61 Comments on this Article show/hide all

Modform 29th Jan '18 42 of 61

Those who are interested in ITM POWER, may want to have a look at BLDP, a Canadian company in fuel cell technology. It has quite a few buses being tested in london. It has won so many contracts with China for buses and trams, also with European countries. Their fuel cell technology uses much less precious metals than normal fuel cell, making them much cheaper to produce.

They have a subsidiary called PROTONEX which produces wearable items for USA army, the device scavenges power from different sources to keep the most critical ones active.

The company actually makes a small profit.

I had held in the past but sold last year as I felt the sp had gone ahead of itself. The sp has been drifting down. There was a short seller attack on Friday but the company issued a statement today and the sp is up 30%.

No advice is intended, please dyor

| Link | Share
Tommykeenanz 29th Jan '18 43 of 61

Fulcrum utilities FCRM a review of this decent company would be hugely appreciated

| Link | Share
Samsgrandad 29th Jan '18 44 of 61

In reply to post #306233

Much more to producing hydrogen than at first meets the eye, however, science moves on.
The recent RNS announcing a joint venture with Shell describes a 10 MW industrial implementation of proton exchange membrane electrolysis.

“Shell and ITM Power will build the world's largest hydrogen electrolysis plant at Rhineland refinery, Germany. With a peak capacity of 10 megawatts the hydrogen will be used for the processing and upgrading of products at the refinery's Wesseling site as well as testing the technology and exploring application in other sectors.”

This is to supplement hydrogen produced from steam and which is used in the conversion of heavy oils into lighter refined fuels. I would assume that waste heat from the refining is used to partly power the hydrolysis. The electricity coming from over supply in the grid.

This pilot project falls short of producing vast quantities of hydrogen necessary for replacing fossil fuels in cars although it's interesting that it is a way of stabilising the supply and demand on the electricity grid, (one of the shortcomings of renewable power) and in doing so creates hydrogen using electricity which would not otherwise be used or stored.

It may not replace all petrol and diesel use but every contribution to fossil fuel consumption will be worthwhile.

| Link | Share
janebolacha 29th Jan '18 45 of 61

In reply to Samsgrandad, post 44:

Slightly off topic.

" it's interesting that it is a way of stabilising the supply and demand on the electricity grid, (one of the shortcomings of renewable power)"

This pilot investment by Elon Musk in Australia is very interesting in that respect. It looks like it could be one way of overcoming the aleatory availability of many sources of renewable energy. It may also turn out to be a great investment!

| Link | Share
bestace 29th Jan '18 46 of 61

In reply to post #306093

We don't yet know how much of that will actually translate into revenues for Altitude.

We do have some indications; their investor presentation after the last interims (slide 13) indicated a 20% cut due to Altitude of the supplier's revenue, i.e. a $500 order placed via a distributor's website on the Altitude platform, on a gross profit margin of 60% means $300 due to the supplier, so Altitude's 20% cut would be $60.

Based on the distributor revenue figures quoted in today's RNS that implies $1.3m annual revenue to Altitude from the 7 partners already signed up and $5.3m from the 57 partners currently being onboarded, so that's $6.6m of annual revenues to Altitude.

For context, broker forecasts (per Stockopedia) are for £12m revenues for FY18, which would include revenue from the legacy promotions business, so their forecasts for revenue arising from the new platform are presumably much lower than that (say around £8m based on £4m of legacy revenues, I haven't seen the actual broker note).

In other words they may have already met their 2018 revenue forecasts just based on the partner sign ups announced today, and ignoring the 88 partners in the pipeline.

That's probably unlikely in reality given there are some sweeping assumptions in those numbers - not least of which is the assumption that 100% of those partners' revenues will be flowing through the Altitude platform (most unlikely I would have thought), and that the 60% gross margin for the partner applies across the board (sounds rather high to me given the nature of the product).

Of course you won't see any of that growth in the historic accounts for FY16 or even for FY17 which won't be released for a few more months yet, however the potential upside here is huge relative to forecasts, they just need to get some traction with partner and supplier signups, and in that context I actually found today's update quite encouraging even though I agree there is still a distinct whiff of jam tomorrow. Bear in mind it's not loss making thanks to the legacy business which just about pays the bills, so it's not as blue sky as some stocks out there.

| Link | Share
Ramridge 30th Jan '18 47 of 61

Re. Altitude (LON:ALT)
[bestace: I have only just seen your note on this subject. Generally I agree with your view. However I cannot reconcile your $6.6m revenues.  I suspect it is based on the target assumption of 210 orders p.a. per distributor rather than the base scenario of 100 orders p.a.]

Altitude is an interesting stock with a high risk profile but also a high reward potential. In my view the potential high reward tips the balance in taking the risk and going long.

The following argument is based on information provided by the company in their 2017 interims presentation (you can download it from their website).
The company shows two scenarios, a base case and a target. Working purely with the base case and the US market only, ALT’s revenues over the medium term are projected to be approx. £43m p.a. So a build-up could be, in the first year £10m ramping up to £43m in year 3.
Considering ALT’s last audited revenues were £4.3m, that’s worth sitting up and take note.
This base scenario assumes capturing 2% – 3% US market share in the medium term.

Here is the second interesting reason. The company is actually building a platform business in the true sense of the expression. A platform business model creates a technology platform with network effects and provides facilities for all parties to transact directly. The platform owner, ALT, does not own the means of production, instead it creates the means of connection, and in the process takes transaction fees based on the completed transactions (viz. ebay, uber, eat, etc)
So as a platform business, we are likely see revenues substantially falling into the bottom line profit and cash flows.
However the risks are not trivial.
- Management have been bullish and optimistic for a number of years. To date they have built the platform but no real revenues from this source to prove the complete business model.
- Take-up by the US is showing promise as yesterday’s RNS shows. But there is still a long way to go before they hit minimum traction.
I have taken a long position but if the company doesn’t show real progress in line with their base case scenario in the near future, then I would likely sell.
Please DYOR

| Link | Share | 1 reply
bestace 30th Jan '18 48 of 61

In reply to post #306613

Generally I agree with your view. However I cannot reconcile your $6.6m revenues.

I was trying to combine the figures disclosed in yesterday's RNS with the figures provided in the interims presentation. It's very possible my understanding is deficient so happy to be corrected, DYOR etc. These were my workings:

7 signed up partners doing $11.2m revenue + 57 partners in the process of coming on board doing $44m revenue = $55.2m of partner revenues, which on a gross profit margin of 40% (not 60% as I said in my last post) means $33.1m of supplier revenue (i.e. 60% x $55.2m), which in turn means $6.6m of revenues to Altitude (LON:ALT) (based on a 20% cut of the $33.1m of suppliers' revenue).

| Link | Share | 1 reply
Ramridge 30th Jan '18 49 of 61

In reply to post #306733

re. Altitude (LON:ALT) Thanks, bestace.
Following the presentation data for the base model, for every $100 that a distributed sells, ALT's transacton fee = $100 *60%(gross margin) * 20% (ALT's fee) = $12. Effective 12% of a distributor's revenues.
Taking $55.2m as the total annualised revenues, that gives $6.6m fees for ALT. Which agrees with your computation. Of course this is over a calendar year, and not current financial year.

| Link | Share
anfitrion 30th Jan '18 50 of 61

In reply to post #306048

I don't agree with you view on Conviviality (LON:CVR) as busy fools. This is obviosuly in vogue as Carillion in on anybody's mind, but the drinks business is far off from construction, as Conviviality basically just applies a mark-up to all their drinks they sell.

Over the last few months, they took on more growth than they could chew and ended up having to hire temporary employees and trucks to deliver on them. So those addition £70m on sales yoy and basically same PBT means they took on those sales at no profit? Hardly. If you dig into drinks wholesale you will realise that rebates from suppliers (the Diageos and Beam / Suntory of the world)
make up 1/3 of earnings, and these come at the end of the year (H2 for Conviviality). With c.8% growth they will be juicy, and this is probably why they are still confident in making their FY numbers while many market participants are scratching their heads around it.

Bad debts could indeed be an issue if the UK goes into a recession, but not an issue at the moment. The receivables are mostly linked to the the large national accounts (Stonegate, Wadworth, JD Wetherspoon...) which represent 60% of Conviviality's sales and are obviously the ones that get to pay with very flexible terms not available to the small accounts. At the moment these guys are posting pretty solid single digit like for like growth so it will be fine. Not that this can't change if the UK goes into a recession, of course. And this is why I agree with you in that the company should ease up on dividend payments until the balance sheet is more solid.

| Link | Share
gus 1065 22nd Mar '18 51 of 61

Utilitywise (LON:UTW) finally published their re-stated year end accounts for year end July 2017.

In a word, “ugly”. Also a separate Q&A - although quite a few more Q’s I suspect for anyone still holding.

I can’t immediately see a reference to the share suspension being lifted but presumably this can now happen. Not sure it will be much cause for celebration to any holders (are you still there Mr. Woodford?).

Nice set of results from Sopheon (LON:SPE) though ......


| Link | Share
tiswas 28th Mar '18 52 of 61

Sky News reporting that CVR is toast.

A stock rank of 92 in January!

| Link | Share | 1 reply
rpannell 28th Mar '18 53 of 61

In reply to post #346798

Conviviality (LON:CVR) - A stock rank of 92 in January!

Yes, but reduced to 69 by mid Feb with a Z score of 1.15 suggesting financial risk.

It's the old question with a SR portfolio:
Do you hold shares for a year regardless OR
Do you sell if the SR reduces below X

I would love to see an analysis comparing the 2 methods.

| Link | Share
Edward John Canham 28th Mar '18 54 of 61

Conviviality (LON:CVR)

Lesson is that if people lose faith (rightly) in the numbers, nothing is savable. SR is totally irrelevant here because it relies on those numbers. There is always going to be a certain amount of the story that cannot be captured by quantitative analysis and if the numbers are wrong .......

If this was a company with a good finance function the placing would probably be going ahead and it would be saved.

I feel for the employees, they have been seriously let down, especially those from recent acquisitions. I hope none of the directors are allowed to hold that position again - but suspect they will.


| Link | Share | 1 reply
JohnEustace 28th Mar '18 55 of 61

In reply to post #346878

Happily I was never a holder, but my learning from this sorry saga is that any time an FD leaves without a very good reason being apparent, the small shareholders should just sell and move on. Treat it like a profit warning that hasn't been announced yet.

| Link | Share | 1 reply
Edward John Canham 28th Mar '18 56 of 61

In reply to post #346893

Happily also I was never a holder and I think you have a good point.


| Link | Share
covkid 28th Mar '18 57 of 61

Thankfully I never bought any despite all the positive comments on here................surprising how quickly the comments go from buy, buy, buy to sell, sell, sell.............just shows it ain’t easy out there........

| Link | Share
xcity 29th Mar '18 58 of 61

Sad news about Conviviality (LON:CVR) though I'd have been surprised by a more positive outcome.

I don't understand how it could ever have had a high stockrank because there were a lot of things making it a low quality investment:

  • high number of substantial takeovers
  • high level of debt
  • large seasonal swings in working capital requirements
  • low margins
| Link | Share
grishas 4th May '18 59 of 61

Hi all,

I'd like to hear the collective views on whether it's time to sell Sopheon (LON: SPE) now. The stock has rallied +55% since 29 Jan when Graham wrote his original piece, and Stockopedia shows its Value factor at a low level of 14.

Has it become overpriced now??


| Link | Share
gus 1065 17th May '18 60 of 61

Interesting to see Sopheon (LON:SPE) was able to get away a placement of 3.1% of its shares held by management at 968p - a decent premium to the then market price of about 930p.

Shares have been on a roll since Graham’s piece at the end of January when they were at 575p. Placement at a premium with II’s together with recent strong performance suggests strong demand/shortage of supply.


| Link | Share | 1 reply
Glorenfeld 29th May '18 61 of 61

In reply to post #364799

Re Sopheon (LON:SPE)

Which makes the recent precipitous decline very puzzling...

| Link | Share

Please subscribe to submit a comment

 Are LON:STHR's fundamentals sound as an investment? Find out More »

About Graham Neary

Graham Neary

Full-time investor and independent analyst. Editor at Cube.Investments, small-cap writer at Stockopedia. Previously a fixed income analyst in the City and institutional fund manager. I'm a CFA charterholder and have the Investment Management Certificate and STA Diploma in Technical Analysis for good measure. When I'm not talking about finance, I enjoy recreational poker, chess and Mandarin Chinese. more »


Stock Picking Tutorial Centre

Let’s get you setup so you get the most out of our service
Done, Let's add some stocks
Brilliant - You've created a folio! Now let's add some stocks to it.

  • Apple (AAPL)

  • Shell (RDSA)

  • Twitter (TWTR)

  • Volkswagon AG (VOK)

  • McDonalds (MCD)

  • Vodafone (VOD)

  • Barratt Homes (BDEV)

  • Microsoft (MSFT)

  • Tesco (TSCO)
Save and show me my analysis