Small Cap Value Report (Thu 1 Feb 2018) - IGE, COM, SPSY, CTO, ALU

Wednesday, Jan 31 2018 by

Good morning, it's Paul here. I have a lunchtime meeting in London, so will only be able to rattle out a few sections early. I'm hoping that Graham might then be able to add a bit more this afternoon.

I added more sections to yesterday's report last night, so here's the link to that.

Let's start with a profit warning;

Image Scan Holdings (LON:IGE)

Share price: 4.25p (down 38.2% today, at 08:21)
No. shares: 136.0m
Market cap: £5.8m

(at the time of writing, I hold a long position in this share)

Trading update (profit warning)

Image Scan (AIM:IGE), the specialist supplier of X-ray screening systems to the security and industrial inspection markets provides a trading update for the year to 30 September 2018 ("FY18").

This is a tiny company, below our usual market cap size. However, 2 readers have already mentioned it this morning, and I hold personally (more's the pity), so I naturally want to look at it, and see what's gone wrong.

The company made a series of positive updates over the summer, which drove the share price up substantially. This also allowed a big holder to exit, via a discounted secondary placing done through the house broker. I took part in that placing, thinking I was getting a bargain. They tried first to sell at 10p, then reduced the price to 8p, when the market price had been around 11-12p. So an apparent bargain. Since then, the share price has dropped by almost two thirds.


There was the first sign of trouble, which I mentioned here on 6 Dec 2017, with the company referring to delivery dates not yet being finalised on a proportion (not stated) of the order book. A reader mentions in the comments that he sold out at the time, sensing trouble ahead. That was a great move. Sadly I didn't have that option, due to my having a position size that's too big to sell in the open market. So I'm in for the duration here.

Profit warning - today the company drops a bombshell, that a £1m order is likely to be cancelled (on unknown terms). That's a material figure - the company did £5.0m revenues last year, and £3.3m in…

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Image Scan Holdings plc is a United Kingdom-based company, which designs, manufactures and supplies portable and fixed x-ray security screening systems to governments, security organizations and law enforcement agencies. The Company also supplies non-destructive inspection systems to manufacturers of automotive emissions control systems. Its security products portfolio consists of portable systems, including FlatScan2-TPXi and FlatScan2-15, which offer real-time digital x-ray screening; conveyor systems, including AXIS-64 and AXIS-3D; vehicle screening, including SVXi and FlatScan Systems, and mail screening, including MailScan cabinet systems and AXIS conveyored systems. The Company offers industrial products under categories, such as production line systems, laboratory systems, portable systems, large item screening, x-ray components and bespoke systems. Its industrial products include MDXi, which is a cabinet x-ray system, and X-Line, which is a conveyed x-ray system. more »

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Comptoir Group plc is a United Kingdom-based company, which is engaged in the operation of restaurants with Lebanese and Middle Eastern offering. The Company owns and/or operates approximately 15 Lebanese and Eastern Mediterranean restaurants based in the Greater London and Manchester area. The primary restaurant brand of the Company is Comptoir Libanais. Comptoir Libanais is a Lebanese and Eastern Mediterranean focused restaurant. It operates approximately 11 Comptoir Libanais restaurants. It is also engaged in franchising the Comptoir Libanais brand to other restaurant operators. It also operates approximately two smaller Lebanese and Eastern Mediterranean outlets under the Shawa brand, and over two standalone high end restaurants called Levant and Kenza. Shawa is a Lebanese grill serving lean, grilled meats, rottiseried chicken, homemade falafel, halloumi and fresh salad wrapped up into traditional shawarmas through a service counter offering. 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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  Is LON:IGE fundamentally strong or weak? Find out More »

52 Comments on this Article show/hide all

gsbmba99 1st Feb '18 33 of 52

In reply to post #307948

It probably depends on who you listen to. An excerpt from . It's two weeks old so maybe it's changed but it suggests some level of legal uncertainty in the absence of new agreements.

"While the transition agreement is still subject to negotiation, the Commission’s draft proposal states that once the UK has withdrawn from the EU it will “no longer benefit from the agreements concluded by the Union”. This is not pernicious, simply a statement of fact: the UK will no longer be an EU member, therefore the EU’s international treaties will no longer apply to it. The proposal further specifies that the 27 will only assist the UK in finding a way to extend the agreements during the transition period if it is deemed to be in the interest of the EU.

As well as binding the UK to the EU’s single market and customs union, the draft proposal seeks to ensure that the UK continues to apply the bloc’s external tariff rates and performs the same border checks with non-EU countries.

This could easily result in a scenario in which UK exporters are no longer able to take advantage of the EU’s existing free trade agreements, but exporters located in countries with EU FTAs would continue to benefit from preferential access to the UK market on the same terms as now. To give a practical example: during the proposed transition, Korean car exporters would still be able to sell cars into the UK without being subject to border tariffs under the provisions of the EU-South Korea free trade agreement. UK car exporters selling into Korea, on the other hand, would no longer be covered by the agreement and would face Korea’s tariffs of 8 per cent."

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ed_miller 1st Feb '18 34 of 52

In reply to post #307983

Re: export arrangements beyond March 2019 - thanks for your views. My own expectation is that the current status quo will persist during any transition period (I cannot see even our government agreeing to abide by all the requirements of the EEA single-market and customs union without access to its benefits, even temporarily) and for the period beyond any transition, for pragmatism to hold sway in any trade beyond the EEA (the government have been finding their proposal to extend the agreements we have with 3rd party nations under existing EU agreements to be extended on an interim/emergency basis till they are superseded by bespoke bilateral FTAs have been well received by 3rd-party nations - reference Liam Fox/ Theresa May racking up the air-miles; the EU's stance on our trade with the EEA however is quite another matter). However things develop, you point to uncertainty beyond March 2019 and clearly, there is uncertainty over future arrangements and associated risk.

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clouds 1st Feb '18 35 of 52

In reply to post #307963

Hi IG,

On Image Scan Holdings (LON:IGE) , what did you know wasn't right? And do you normally view a decline in the SP as a sign to sell?

I try to assess how much something is worth, and pay less than that, so would generally be keener to buy / less keen to sell if the SP has declined without a change in the actual assessment of value.

Do you think it's worth more or less than the current price? If less, then presumably you think the company's situation has changed drastically, given how much less you can buy the company for now.


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loudenr 1st Feb '18 36 of 52

In reply to post #307758

It might just be me but I am hoping the broker estimates are on the conservative side given there have been a series of positive updates. I suppose final results will show how accurate they are

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Trident 1st Feb '18 37 of 52

In reply to post #307868

Re: Tracsis (LON:TRCS). Yes, a curious omission by a company that espouses the openness of its transactions, and its acquisition model. Perhaps this doesn't quite fit the constraints they have previously set themselves.

In recent times they have made a few 'investments', rather than acquisitions. Perhaps this is one that straddles the criteria. There are only totally exempt filings for the accounts of the companies -all of which are relatively new incorporations.

Maybe because they are separate companies, with separate owners, they don't want to show their hand at the individual acquisition pricings, in case it sets off bad feeling?

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JohnEustace 1st Feb '18 38 of 52

In reply to post #307828

The Google stock screener lets you screen on price change % over 13, 26, or 52 weeks as well as other common metrics.

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seadoc 1st Feb '18 39 of 52

Deltex Medical (LON:DEMG) Anyone else hold? I have just sold at 1.3106p and taken up the subscription offer at 1.25p in the hope of replacing shares just sold, and I should get a tax refund under EIS of 30% so effective cost of the replacement shares to me is just 0.875p. If I have the wrong end of the stick let me know, but if I am holding both wrong ends please keep very quiet!



PS Not suggesting this is a buy, just for info if you already hold.

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IGotPoesJacket 1st Feb '18 40 of 52

In reply to post #307973 has some free tools that do a portion of this.
But you get what you pay for as the adage goes....

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alpha2 1st Feb '18 41 of 52

The CPU referred to by Comptoir will be there Central Production Unit. Presumably a sale and leaseback to help cashflow. I actually like this brand as providing a reasonable combination of value and quality but doesn't look investable at a PE of 66.7.

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Funderstruck 1st Feb '18 42 of 52

Spectra Systems (LON:SPSY) Paul , thanks for your reports as always.

Does the broker forecast same for the yr 2018 of EPS 6p , ie Flat growth for that yr or a repeat of an 18% gain. Your far better at interpreting broker results than I am.

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andrea34l 1st Feb '18 43 of 52

In reply to post #307928

Thanks Julian & Gus for both your kind good wishes and advice; the shorting site is the one I used before, though the site I used for momentum indication (which allowed filtering by all sorts of different criteria) is not one mentioned.

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TomJoons 1st Feb '18 44 of 52

Apologies for the off topic question, but does anyone have experience investing in North America, i.e. nasdaq?
There don't seem to be equivalents of "trading updates" that I can find. I searched various company documents on but can't find any commentary on how companies are performing against expectations, which I find to be of enormous value.

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JohnEustace 1st Feb '18 45 of 52

In reply to post #308233

This has been asked before and there doesn't appear to be a direct equivalent. The best way I know is to open an account at and set up a portfolio there with e-mail alerts. The transcripts of earnings calls will then get e-mailed to you along with other articles.
I find those transcripts very helpful - you get to hear directly from management and see the Q&A from the analysts on the calls. Or if you want to listen in directly then the time difference sometimes helps. For example the Apple call will be here in 40 minutes:

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TomJoons 2nd Feb '18 46 of 52

In reply to post #308313

Thanks for the suggestion, will look into it!

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ed_miller 3rd Feb '18 47 of 52

In reply to post #308208

ADVFN?, Moneyam?, Interactive Investor (

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John McArthur 7th Feb '18 48 of 52

In reply to post #307868


We deliberately didn't announce the consideration details concerning these transactions as under AIM rule 12 they were not significant transactions and there was no reason to do so.

I appreciate you might find this 'worse than useless' but given the choice I would sooner not have to always announce the exact specifics of a deal for 2 main reasons which I hope you will understand:

1) Given we are a company with a stated strategy of accretive M&A these details do end up acting as a precedent which other target companies try to use for their own ends i.e. our 'best' transaction will be used as the template on which to build when negotiating a deal with Tracsis which doesn't help.

2) With acquiring very small companies it can be controversial with staff and management when they suddenly realise the boss/bosses have become fairly wealthy overnight! This can also be true with clients/customers of the respective business.

As I have repeatedly said on this forum if shareholders wish to discuss specifics not disclosed within our annual report or an RNS they are welcome to contact me directly.

Best regards

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John McArthur 7th Feb '18 49 of 52

In reply to post #308048


I hope that my last note to Ramridge clarifies but if not let me know. We will always wish to be open and transparent with investors but this obviously has to be balanced with commercially sensitivities.

TCS and DRS are 100% acquisitions but under the AIM class tests their relative size meant we didn't have to RNS anything whatsoever but thought shareholders would like to see progress on the M&A front.


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Ramridge 7th Feb '18 50 of 52

In reply to post #311528

Hi John -

I said this in the past and I make no apology for repeating it. It is very refreshing to see a CEO engage directly with private investors through the medium of a bulleting board. Others should take note and follow your lead.
I take your point that strictly speaking you didn't have to RNS. But there is a difference between what is legally permissible and what is good for corporate governance and good for management.
And so for the reasons you have stated, you saw fit to provide some of the acquisition details but withhold others, such as the purchase prices.
As a shareholder, I am left with the choice between trusting you that the deals are good ones, or upping sticks and selling my shares. Fortunately I know your excellent track record when it comes to acquisitions and the meticulous process your team follows in sifting potential candidates. So in your case I have no hesitation in trusting your judgement.
But I will say that there has been at least one occasion in the past with a larger plc, when my vote went the other way.

Best wishes, Ram

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Ramridge 8th Feb '18 51 of 52

In reply to post #311528

Re. Tracsis (LON:TRCS)

Good morning John

Your RNS this morning " Additional information regarding acquisitions" : a big thank you.

Best wishes, Ram

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John McArthur 8th Feb '18 52 of 52

In reply to post #312323

We aim to please! In future please don't hesitate to contact me directly.

Things withheld from an announcement are unlikely to be price sensitive (as otherwise they would need included) and therefore we can often share additional information directly with shareholders even if it is not disclosed via RNS.

Hope this helps.

Best regards

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

About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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