Small Cap Value Report (Mon 31 Dec 2018) - Reflections - VLE, BRBY, HAT, PCF, CRL, BATS, REC, DPEU, UCG

Monday, Dec 31 2018 by

Good morning!

The news is terribly boring today, so I think I might just do a quick round-up of my personal portfolio, to show what went right and what went wrong in 2018.

Of course, nothing below should be construed as "tips" or "advice" - I make plenty of mistakes.

For context: 

  • the FTSE All-Share Total Return Index is down 9.5%
  • the FTSE AIM All-Share Total Return Index is down 18%.

(Total return is measured from 29th December 2017 to last night's close, and includes the beneficial effect of dividends.)

Volvere (LON:VLE)

  • Total return: 22%
  • Share price: 1050p
  • Market cap: £33 million
  • StockRank: 97

Still my largest holding (16% of the portfolio) and I remain happy to leave it in the portfolio. CEO Jonathan Lander was good enough to come to Mello London this year and explain how this investment vehicle works to a large gathering of private investors.

The cash balance is worth perhaps £33 million after £6 million of buybacks, i.e. it's capitalised at around cash value with two businesses thrown in for free. One of these, a bakery, is of a substantial size and could move the needle again for Volvere if its performance improves and/or it is disposed.

Please note that the stock is illiquid and only suited for long-term holders. The major uncertainty around it now is how the massive cash pile will be used - it's a bet on management's ability to continue their fine track record.

Burberry (LON:BRBY)

  • Total return: -1%
  • Share price: 1720p
  • Market cap: £7.1 billion
  • StockRank: 85

I've had a long-term love affair with this company, first buying into it back in 2012. I traded in and out of it a few times, but my current holding has been in the portfolio since January 2016.

I think it's a highly attractive and perhaps a timeless brand. It is 11% of my portfolio.

The important thing to remember is that British perceptions matter less than Asian perceptions of it. The big spenders, even in the British stores, are Asian tourists.

Top-line revenue growth has admittedly slowed down (adjusted revenue +4% in the latest H1 report), so the focus has shifted to cost savings under new CEO Marco Gobetti and a new creative vision under Chief Creative Officer Riccardo Tisci.

Both of these key employees are…

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

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Volvere plc is a holding company. The Company identifies and invests in undervalued and distressed businesses and securities, as well as businesses that are complementary to existing group companies. It operates through Food Manufacturing segment. Its food manufacturing segment consists of the Company's subsidiary, Shire Foods Limited (Shire), which is engaged in manufacturing frozen pies, pasties and other pastry products for retailers and food service customers. more »

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Burberry Group plc is a manufacturer, wholesaler and retailer of luxury goods. The Company also licenses third parties to manufacture and distribute products using the Burberry trademarks. The Company's segments include retail/wholesale and licensing. The Retail/wholesale segment is engaged in the sale of luxury goods through Burberry mainline stores, concessions, outlets and digital commerce, as well as Burberry franchisees, prestige department stores globally and multi-brand specialty accounts. The Licensing segment is engaged in the receipt of royalties from the Company's partners in Japan and global licensees of eyewear, timepieces and European childrenswear. The Company's product divisions are Womens, Mens and Childrens apparel, Accessories, and Beauty (which includes fragrance and make-up). Its subsidiaries include Burberry Latin America Holdings, S.L, Burberry (Suisse) SA, Burberry (Taiwan) Co Ltd, Burberry (Thailand) Limited and Burberry FZ-LLC. more »

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H&T Group plc is a non-trading holding company. The Company provides a range of simple and accessible financial products tailored for a customer base, which has limited access to, or is excluded from, the traditional banking and finance sector. Its segments include Pawnbroking, which is engaged in providing secured loans against collateral (the pledge); Gold Purchasing, which is involved in buying Jewelry directly from customers through its stores; Retail, which is involved in retail sales of gold and jewelry, and the retail sales are forfeited items from the pawnbroking pledge book or refurbished items from its gold purchasing operations; Pawnbroking Scrap, which comprises various other proceeds from gold scrap sales other than those reported within Gold Purchasing; Personal Loans, which comprises income from its unsecured lending activities, and Other Services, which comprises third party check encashment, buyback, prepaid debit card product and foreign exchange currency services. more »

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

37 Comments on this Article show/hide all

Beginner 31st Dec '18 1 of 37

Many thanks to you both for your wisdom, insights and expertise. Good luck and good health for the coming year.

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andrea34l 31st Dec '18 2 of 37

A quiet day, with little news on the market; thanks for all of your valuable commentary this year.

Happy New Year to all - hoping 2019 will be a better year in the markets.

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Howard Adams 31st Dec '18 3 of 37


S4 Capital (LON:SFOR) has a nice update (Martin Sorrel's new company),

Euro reportable revenues were up almost 46%, gross profit up almost 40% and operating EBITDA at the MediaMonks level up almost 118%.

Like-for-like revenues were up over 51%, with gross profit up over 44%. Operating EBITDA at the MediaMonks level was up over 111%.

Prestigious digital content assignments from two major global package goods companies were secured just before Christmas, which will impact next year, and indicate the increasing market relevance of S4 Capital's "faster, better, cheaper" digital offer in an always-on environment.

The merger with MightyHive was completed on Christmas Eve and three-year plans and budgets for next year are already in preparation, indicating continued strong organic growth.

I hold small amount.


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Howard Adams 31st Dec '18 4 of 37


Serica Energy (LON:SQZ) has a bit of news.

Serica Energy plc (AIM: SQZ) is pleased to announce the spud of the ENI UK Limited operated Rowallan exploration well 22/19c-G (Serica 15%). The well is targeting the high-pressure, high-temperature gas condensate Rowallan prospect, which comprises a significant structural fault and dip-closed trap in the east of Block 22/19c in the Central North Sea. The Ensco 121 heavy duty jack-up rig is being used to drill the well.

I hold baby amount.


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paraic84 31st Dec '18 5 of 37

Hi Graham,

At some point in the new year it would be great to hear your/Paul's thoughts on how the IFRS 16 leases accounting changes - which come into effect for accounts covering 1 January 2019 onwards - might affect perceptions of certain stocks. It will show leases more clearly on the balance sheet which presumably will not do distressed retailers any favours. Ideally investors should be taking into account lease holdings already but as we know many investors (like me!) don't properly inspect balance sheets or are too forgiving of debt.

In the mean time fellow readers can get a fairly straightforward background briefing here:

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cafcash49 31st Dec '18 6 of 37

I just want to say a big thank you to Paul & Graham. They do a difficult job extremely well and contribute massively to our success and the conversation they engender.
The great thing about the SCVR community is the good natured dialogue that happens and we all benefit. Some other sites, which I don't follow, I am told are not so friendly.Long may this continue with both Graham and Paul.

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Howard Adams 31st Dec '18 7 of 37


Augean (LON:AUG) flying high today, up over 12.91% (as I type).

No idea why. Its been rising steadily since March though.

By luck rather than serious design, I topped up early this morning as I have just got a toe in the water holding.

According to IC institutions hold 68.67% of shares so it's a bit illiquid. Harwood Capital hold over 25%, then nine others with the second and third holding 13% and 8% respectively. Remainders range from 5% to 1.2%.


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Camtab 31st Dec '18 8 of 37

Happy New Year to one and all and thank you for the many insights offered. May 2019 be a good one.

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paraic84 31st Dec '18 9 of 37

In reply to post #431128

Looks quite interesting. As a holder, do you know what the "outstanding landfill liability issue with HMRC" is? Is that holding back the share price? I saw someone mention it in a post on here previously.

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herbie47 31st Dec '18 10 of 37

In reply to post #431128

There has been significant buying by one director this month.

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Graham Neary 31st Dec '18 11 of 37

In reply to post #431068

Thanks Beginner! G

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Graham Neary 31st Dec '18 12 of 37

In reply to post #431118

Cheers for that nice comment - always good to know our work is appreciated. G

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crazycoops 31st Dec '18 13 of 37

Thanks for sharing your portfolio reflections Graham. And thank you to both you and Paul for some excellent analysis throughout the year. Let us hope that market conditions are a little friendlier in 2019.

Happy new year to all!

Blog: Share Knowledge
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FREng 31st Dec '18 14 of 37

FCCN is up sharply today on low reported volume and no news. Could it be short selling being closed for the year end?

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Chrisfarrell21 31st Dec '18 15 of 37

Hi Graham (and Paul),

Thank you for all you both do for us during the year. The above reflection on your portfolio is not only very helpful, but also typical of yours and Paul’s open, honest and straightforward approach to investing, and analysing companies generally. It’s rare and appreciated.

I was also pleased to hear you (Graham) are a United fan, long may Ole’s unbeaten run continue!

Take care, both of you.


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Beginner 31st Dec '18 16 of 37

In reply to post #431138

Augean (LON:AUG) failed to pay landfill tax estimated by HMRC at c£9.4m. The company disputes this, saying the nature of the waste and methods of disposal did not incur the tax. The dispute seems to be around an incinerator.  The matter is ongoing. This could bust the company. I am a former holder, but would not go back in yet.

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barnetpeter 31st Dec '18 17 of 37

I note that Foot is down to 25p today. It started the year at 260p approx. Some fall! Not a holder but regularly pass a local store. Tempted to buy a few as a punt.....

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 Are LON:VLE'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 »


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