Small Cap Value Report (Mon 9 Apr 2018) - CVR, FCCN, MTC, KWS

Monday, Apr 09 2018 by

Good morning, folks.

Apparently, there has been a technical fault with the company announcements RNS feed this morning. Let's hope they fix it soon!

8:45 AM update: there was a large release of announcements at 8:25, so I'm going to assume the backlog has been cleared. Some companies reporting which we follow here include Keywords Studios (LON:KWS), French Connection (LON:FCCN) and Hollywood Bowl (LON:BOWL).

Was anybody caught out by disorderly trading in shares whose news was delayed? There is a risk that some shareholders might have been disadvantaged by the delayed release, to them, of important information.

As an aside - I remain in favour of the US system, where news is announced after the market closes in the late afternoon/early evening. I can't see any downsides to doing it that way!

Conviviality (LON:CVR) (suspended)

A quick post-script on Conviviality, and the final outcome for its two divisions ("Direct" and "Retail").

The news has been positive for employees, customers and suppliers, as a series of deals are likely to have saved many jobs and will lead to the continuation of most of the group's activities, under new owners.

C&C (LON:CCR) (owner of Magners/Bulmers, Tennent's, and other drinks brands), with the support of the giant brewing company AB Inbev, has bought Conviviality Direct, including Matthew Clark and Bibendum.

Bestway, one of the UK's biggest food and drinks wholesalers, has picked up "the business and assets" of Conviviality Retail, but the sale proceeds won't be sufficient to pay off creditors:

It is with regret that the Board notes that the companies are not expected to have sufficient assets to satisfy all their liabilities.

PricewaterhouseCoopers will be in contact with creditors of Wine Rack Limited, Bargain Booze Limited and Conviviality Retail Logistics Limited.  The Board also understand that the realisations will be insufficient to provide any return to shareholders.

The new owners are likely to have a more sober view (pun intended) of the true worth of Matthew Clark, Bibendum, Bargain Booze, Wine Rack, etc,, compared to Conviviality.

I hope that none of our readers were too heavily invested in CVR. The story continues now with…

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

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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 »

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French Connection Group PLC designs and supplies branded fashion clothing and accessories for men and women. The Company operates retail stores and concessions in the United Kingdom, Europe, the United States and Canada and also operates e-commerce businesses in each of those territories. Its principal brand is French Connection, which designs, produces and distributes branded fashion clothing, accessories, such as toiletries and fragrances, shoes, watches, jewelry, eyewear, furniture and homeware through its distribution channels: retail stores, e-commerce, wholesale and licensing. Its other brands include, Great Plains and YMC. The Company operates in approximately 50 countries around the world. The Company's subsidiaries include French Connection Limited, French Connection UK Limited, French Connection (London) Limited, Contracts Limited, French Connection Group Inc., French Connection (Hong Kong) Limited, French Connection (Canada) Limited and YMC Limited. more »

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Mothercare plc is a retailer for parents and young children. The principal activity of the Company is to operate as a specialist omni-channel retailer, franchisor and wholesaler of products for mothers-to-be, babies and children under the Mothercare and Early Learning Centre brands. The Company's operating segments include the UK business and the International business. The UK business segment includes the United Kingdom store and wholesale operations, catalogue and Web sales. The International business segment includes the Company's franchise and wholesale revenues outside the United Kingdom. Its clothing and footwear product includes ranges for babies, children and maternity wear; home and travel includes pushchairs, car seats, furniture, bedding, feeding and bathing equipment, and toys are mainly for babies. It operates in the United Kingdom through its stores and direct business, and across the world in over 60 countries through its international network. more »

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43 Comments on this Article show/hide all

matylda 9th Apr '18 24 of 43

Symphony Environmental Technologies (LON:SYM)

Just my quick post-it note view...


Revenue up 20% or so, forecast for 10% next year.

EPS up over 100%, forecast for 50% next year. Revised up from 0.1 to 0.4 in the past 6 months.

Operating Margin OK at 5.8%.

ROCE a massive 30%.

Debt Free.

Where's the kicker going to come from? Probably needs to come from more take up by countries in the Middle East and the European and US markets - I believe they have recently announced some activity in Italy.


From a Minervini point of view (or my view of his view), it's above the 50, 130 and 200 MA's which are all in trending up and in the appropriate order. It's also up over 50% from the 12 month low and within 25% of the 12 month high.


Would have been nice to get the break-out at 19p so I am interested - It's a case of paying up or waiting for a retrace as all round it seems fine to me. I guess the only question mark would be the kicker.

As I say, just chipping in, with my quick post-it note view.

Blog: Briefed Up
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SundayTrader 9th Apr '18 25 of 43

In reply to post #351128

Issues with Symphony as an investment are

- Low "moat" The degradation technology which they sell is well-established basic chemistry which can be and is replicated by anyone who cares to enter the market.
- Its markets are defined entirely by government regulation. That is, they can only sell in those countries where the government has decreed that all polythene materials must be made with specific degradation characteristics.
- To date, regulators in the US and EU have not deemed this the right way to go for dealing with polythene pollution. As with anything environmental, the issues are complex, and it is a reasonable argument that it is better to go with a simple and cost-effective solution, rather than for more "perfect" but less attainable solutions. Still, until that "reasonable argument" finds favour, Symphony's markets will remain limited.

All that said, so far as I can tell, Symphony's management look competent and making a good shot at the opportunities that are available.

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truegent 9th Apr '18 26 of 43

Can someone please tell me what is the US version of the RNS service we have here in the UK ?

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Gromley 9th Apr '18 27 of 43

A trading update this morning from Carclo (LON:CAR) – trading in line , but it’s what it doesn’t say that would worry me if I were a holder.

Discussed by Graham back in January and by Paul in November.

A brief recap, this is potentially an interesting growth stock on a modest valuation, but seems to slip up from time to time.

The HY results statement in November was imho slightly less than forthright – telling us that  an

outperformance by LED Technologies offsetting a weaker performance by Technical Plastics

Except that EPS was down 20%, despite the previous expectation of c. 20% increase over the full year. “partially offsetting” was I think the phrase they were searching for.

On the underperforming Technical plastics division we were “reassured” that :

The Board expects the division's performance to be significantly better in the second half

And that

The Board anticipates full year trading will be in line with its expectations and the Group remains on track to grow substantially over the medium term


Forward to a  January Trading Update and we learned that

The stronger second half performance across the Group, anticipated at the time of the Interim Results in November last year, is not now expected to be achieved
…. there has been an unexpected delay in the awarding of two large tooling and automation contracts. In addition, a large and long standing non-medical customer which had been indicating a strong second half for our moulded components has not yet increased its orders.

I bolded the second part there as I think it is very pertinent to today’s announcement.

(incidentally on the January announcement the price fell from the 120s to 80s)

Although it could be argued that these delayed orders now have nothing to do with the current year performance and the trading update purely related to the current year; I cannot help but think that if they had closed or made substantial progress on these orders, they would been at pains to tell us.

In this case I would conclude that no news is NOT good news.

The shares are largely unmoved this morning, as you might expect for an inline statement , but personally I wouldn’t want to be holding up the results statement in early June – it would seem to me that the outlook statement is more likely to disappoint that surprise to the upside.

Stockopedia rates Carclo (LON:CAR) as a ‘value trap’ and that seems about right, it would require momentum to become a 'turnaround' and at the moment earnings momentum is in the wrong direction.

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runthejoules 9th Apr '18 28 of 43

Thanks Sundaytrader Howard, Bruce & Matylda for your thoughts.

'- Its markets are defined entirely by government regulation. That is, they can only sell in those countries where the government has decreed that all polythene materials must be made with specific degradation characteristics.'

I'm not sure about this one though - with consumer sentiment running against non-biodegradables, surely one of their selling points is that oil companies & food companies don't really have to change their production methods too much, just add their additives to them. Ie that it's not a disruptor. I'd like to know if you've identified any serious competitors within plastic who might eat their shrink-wrapped lunch: there are plenty of non-plastic packaging startups waiting in the wings: Ta

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Julianh 9th Apr '18 29 of 43

A request for Keywords Studios (LON:KWS) please. As usual the adjusted growth looks a lot better than the the basic, diluted version. But in this case it might make sense. Acquisitions are a fundamental part of the business model. And, based on the recent PI World presentation, they seem to be very good at choosing acquisition targets and integrating them well. Two larger than usual acquisitions during the year have brought higher than usual acquisition costs so maybe it makes sense to exclude at least these excessive acquisition costs. And they are building a leading position in a growing market with customers who, probably, find it easier to buy from the sort of one stop shop that Keywords Studios (LON:KWS) can offer.
Looking forward to reading your thoughts, Graham
Dislosure - I am long Keywords Studios (LON:KWS)

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ed_miller 9th Apr '18 30 of 43

In reply to post #351058

Re Keywords Studios (LON:KWS) I think that ED releasing summary results ahead of the RNS release is sufficient to justify the term 'false market'; not that I mean to blame Equity Development particularly for that fiasco, rather than the London Stock Exchange. Though, in view of what happened this morning, perhaps ED (and others) ought to change its procedures such that they only release summary results/commentary AFTER they have confirmed the relevant RNSs have actually been published by the London Stock Exchange. (No position in Keywords Studios (LON:KWS) )

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timarr 9th Apr '18 31 of 43

In reply to post #351188

It's got nothing to do with ED: the point is that some people knew about the announcement and could trade on it, and some people couldn't. I'm not even sure what the rules would be in this situation if an insider traded at the opening on the assumption the information was in the public domain.

Disorderly market, perhaps, but certainly not a fair one.


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ed_miller 9th Apr '18 32 of 43

In reply to post #351198

Re Keywords Studios (LON:KWS) and disorderly markets, my view is that no-one should be allowed to trade on information until they have confirmed that the RNS has actually been published, similarly, no-one should be releasing privileged information until they have confirmed that the relevant RNS has actually been released and hence the information is no longer privileged. If the rules don't reflect this then I think the rules should be changed. I'd forgive ED this time. If it happened again I wouldn't be so forgiving and I would not agree that it's got nothing to do with ED; but I'm happy to agree that, this time round, it is the London Stock Exchange that needs to account for its actions.

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bottomoftheheap 9th Apr '18 33 of 43

In reply to post #351158

It's called EDGAR (an acronym for summat!)

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tomps3 9th Apr '18 34 of 43

Just posted the video of the Keywords Studios (LON:KWS) analyst presentation, this morning:

Andrew Day (CEO) & David Broderick (CFO) present the Group’s full year results to the 31st of December 2017.

KWS video overview – 00:21

Andrew Day, CEO
Introduction – 02:22

David Broderick, CFO
Financials – 16:53

Andrew Day
Strategy – 24:03

Q&A – 45:33

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Asagi 9th Apr '18 35 of 43

Why do people on this thread keep bringing up Equity Development (ED)?

I've not seen the regulations but I'd imagine that a company like Keywords Studios (LON:KWS) has met all its legal obligations once it has filed with a regulatory information service (RIS) such as the London Stock Exchange's RNS.

Why should it not be permitted to report its profits etc. to shareholders just because the RIS provider has not got its act together? As for criticising Equity Development, it is likely that Keywords Studios (LON:KWS) and all the other companies reporting this morning had put their announcements on their own webpages anyway.

Don't blame companies, analysts, management, brokers or PR for their conduct this morning. Responsibilty lies firmly with the RIS provider for any false market created by their incompetence.


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herbie47 9th Apr '18 36 of 43

In reply to post #351118

What difference is that from 7am? If they were released at say 11pm for Dual listed US shares? Some dual listed ones are issued at odd London times. The US system you have all night to study them rather than just 1 hour before the market opens, this is often a time people are travelling to work or busy.

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Graham Neary 9th Apr '18 37 of 43

In reply to post #351183

re: Keywords Studios (LON:KWS). Thanks for the suggestion, Julian. It's coming up next. G

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truegent 9th Apr '18 38 of 43

In reply to post #351213

ah thanks, i just took a look, crikey its not very user friendly ,it doesnt seem at all like the FTSE RNS. The actual rns announcements arent great but at least we have investegate which does a great job of the formatting.

extra questions, do you know if US companies are obliged to release trading updates like FTSE stocks ? and do they have interims and prelims like over here ? ive heard in the US they have 'earnings season', do all companies have to report during a specific time of the year ? or if anyone else knows please let me know.

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Samsgrandad 9th Apr '18 39 of 43

I might be wrong but my understanding of insider trading is that anyone who trades with information not in the public domain is guilty of insider trading. If the official RNS service is down does this not make anyone who gets information from the company broker or Twitter for instance an insider. Are we supposed to ensure that information has been disseminated by RNS before acting or should bodies which receive embargoed information be obliged to check before emailing or twittering. I hope the FCA will look into this but I don't suppose they will.

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PabloAguas 9th Apr '18 40 of 43

In reply to post #351173

I remember an article about edible plastic on the BBC's Tomorrow's World show. I reckon it was broadcast in the early Eighties. The presenter bit into a sandwich wrapped in an edible plastic film. I always wondered why anybody would want to eat a sandwich without unwrapping it first!

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dahokolomoki 9th Apr '18 41 of 43

In reply to post #351098

Encouraging for Revolution Bars (LON:RBG) that Deltic is still looking to get to a situation where their shares are publicly traded - that means they're probably still actively looking to merge/reverse into RBG to achieve the same public listing.

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SundayTrader 9th Apr '18 42 of 43

In reply to post #351368

re Symphony Environmental Technologies

Sorry, I worded that badly. My understanding is that there are some purchasers of oxo-degradable plastics in the US and European markets, as there are also of other sorts of degradable plastics. But I think that there is limited scope for market expansion for any of the technologies without direction from the authorities (which is more or less what Symphony say in their own reporting).

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Julianh 9th Apr '18 43 of 43

In reply to post #351278

Thanks, G. Much appreciated.

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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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