Small Cap Value Report (Thu 18 Jan 2018) - CPC, PMP, CALL, CLL

Thursday, Jan 18 2018 by

Good morning, it's Paul here!

I'm going to start today's report by catching up on several stocks from yesterday, then on to today's announcements.

I see that Halfords (LON:HFD) has reported on its Christmas, and year to date (ending 03/2018) trading. It seems to be doing well at the retail sales level (with cycling being the biggest growth area). However, group profit only expected to be broadly in line with current market expectations. I refuse to shop in Halfords after they stung me for about £3-4 (I forget the exact amount) for a tiny pack of washers that was of vital importance to me at the time, that was only worth about 10p, if that. Retailers need to learn that today's high gross profit margin is tomorrow's lost sales from an alienated customer.

Several readers yesterday asked me to look at:

City Pub (LON:CPC)

Share price: 169.5p (up 1.2% yesterday)
No. shares: 56.5m
Market cap: £95.8m

Trading update

The City Pub Group, the owner and operator of premium pubs across Southern England, is pleased to announce a 2017 trading update.  
For the year ended 31 December 2017, like for like sales were up by 3.8%. Total turnover for the year was approximately 37.4m, an increase of approximately 34% on the prior year, with 33 pubs trading at the end of the financial year.
Trading over the Christmas period was strong with many of the recent openings trading ahead of management's expectations and a number of pubs achieving a record result.
Following a successful December trading period, the Group confirms that it has traded in line with market expectations for 2017 and remains optimistic about its prospects for 2018.

This small pubs group listed on AIM in Nov 2017.  A pleasingly clear update above, and the company is trading well. This is in common with other pub groups, which generally seemed to have good trading over Xmas.

Good sector? - There seems a clear trend amongst consumers to skew spending more towards experiences, and less towards buying stuff in the High Street. Pub operators generally reported stronger LFL sales growth than many retailers. Some commentators have speculated that we might have already reached "peak stuff" - i.e. most people already own everything they need, and hence want to spend…

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City Pub Group plc is a United Kingdom-based company. The Company owns and operates an estate of premium pubs across southern England. The Company’s pub estate comprises approximately 41 free houses located largely in London, cathedral cities and market towns, each of which is focused on appealing specifically to its local market. The Company’s portfolio consists of predominantly freehold, managed pubs, offering a range drinks and food tailored to each of its pubs’ customers. The Company provides beer, food, and entertainment facilities, as well as offers rooms and passages on rental basis. more »

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Portmeirion Group PLC is a United Kingdom-based company, which is engaged in providing ceramic tableware, cookware, giftware and tabletop accessories. The Company has five brands: Portmeirion, Spode, Royal Worcester, Pimpernel and Wax Lyrical. The Company's segments include UK and US operations. Portmeirion offers tableware and gifts with collections, such as Sophie Conran for Portmeirion and Ted Baker collection. Spode brand includes Blue Italian, Blue Room and Christmas Tree. Royal Worcester is engaged in providing porcelain tableware and cookware collections. Pimpernel provides placemats, coasters, trays and accessories. Pimpernel also includes Wrendale Designs collection, which includes placemats, coasters, trays, ceramic and melamine gift sets. Wax Lyrical offers fragranced candles and reed diffusers. The Company caters to markets, such as United States, the United Kingdom, South Korea, India, Taiwan and Thailand. more »

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Cloudcall Group plc is a United Kingdom-based holding company. The Company and its subsidiaries are engaged in software and unified communications business. The Company provides a suite of cloud-based integrated software and telephony products and services under the name cloud. The Company is a full-service communication provider. The Company designs, develops and operates integrated communication services for customer relationship management (CRM) systems. The Company's CloudCall portal enables to manage organization’s call profiles, configures all settings and manages user and service accounts and access real time activity reports and call recordings. Its automatic call distribution (ACD) feature routes the callers directly to available team members in the organization. The Company’s subsidiaries include Cloudcall Ltd, Cloudcall BY. LLC and Cloudcall, Inc. more »

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

49 Comments on this Article show/hide all

mammyoko 18th Jan '18 30 of 49

Thanks jjis. Despite their excellent AUM performance (up 32% YoY vs Liontrust Asset Management (LON:LIO) 24.3% YoY over same period and excl acquisitions) and the fact that a higher proportion of their increase is coming from net inflows, they have traded sideways over the last year. Their size seems to count against them so perhaps they are just a stock that will remain permanently cheap?

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dahokolomoki 18th Jan '18 31 of 49

Good result from City Pub (LON:CPC), along with other good results (Be At One, Deltic, etc) should mean a good result for Revolution Bars (LON:RBG) as well! 

Good short term buy ahead of a trading update from Revolution?

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covkid 18th Jan '18 32 of 49

Those washers were probably made in China & shipped half-way across the world someone had to procure raw material, set up a machine, pack them, ship them so that Halfords could buy them & then put them on a shelf so you could buy them (& they had to make profit for their shareholders.........) .........& you expect to pay 10p..................I blame Martin Lewis for the expectation that everything should be cheap.........& in reality we get cheap & nasty........£3-4 sounds about right for the service you got !!

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Beginner 18th Jan '18 33 of 49

In reply to post #300553

Just try using your local motor factor. Headlight bulbs are about £2.50 a pop. I have never understood why anyone uses Halfords (LON:HFD) for anything car related. They are just SO expensive.

(Matylda has posted on City Pub (LON:CPC) with the usual succinct elegance.  Could I please add that the estate is stuffed with top quality premises, and the management are best in class.  Some figures would be nice to see, but I think this has great potential).

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Reacher 18th Jan '18 34 of 49

In reply to post #300493

Hi Ramridge - Apologies in advance, but this is going to sound very technical. I have tried to be as brief as possible.

IFRS15 will apply to annual reporting periods commencing on or after 1 January 2018. So more likely to see it reports for Y/E 31/12/18. However, early adoption is encouraged. A number of companies will have undertaken projects to assess the impacts of IFRS 15 and disclosure is likely to be seen in 2017 financial statements.

Quick 5 step summary of the impacts:
1 Identify the contract with customer:
- who are the parties, what are the commitments/obligations, rights to goods/services and payment terms can be identified -> commercial substance.
2 Identify the performance obligation:
- this is the promise to deliver goods/services and can be distinct or part of larger contract (but distinct nonetheless) eg mobile phone contract which can be broken into the phone element and the data service plan. IFRS15 will apply to the data service plan and how it is recognised.
- Also raises questions of warranties and service plans, and application of discount vouchers
3 Determine the transaction price
- there could be a financing element involved eg mobile phone contract where the repayment of the phone is over 24 months.
4 Allocate the transaction price to performance obligations
- this may be an observable price if available. Or residual approach.
5 Recognise revenue:
- "transfer of control" principle. Recognise revenue as or when control of the good or service is transferred to a customer. Control may be transferred over time, or at a point in time. Assessed from customer's perspective and at the performance obligation level.

Previously revenue recognition was driven by risk/reward transfer.

I believe construction companies and those with long term contracts will have the most impact. Also as noted above mobile phone companies may be impacted. However, assessment will have to be undertaken by all companies.

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Paul Scott 18th Jan '18 35 of 49

In reply to post #300503

Thanks Matylda.

Re City Pub (LON:CPC) - Liberum research notes on this company (short update today, and huge initiation note yesterday) are now available on Research Tree. I shall take a look later.

Regards, Paul.

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john652 18th Jan '18 36 of 49

Hi, any thoughts on EMIS (emis), looks like a a fairly vague impact hence 17% down? - sorry ignore this just seen update earlier.

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Samsgrandad 18th Jan '18 37 of 49

Paul, you should check out the DIY shelves at your Pound shop, I got an assorted selection of set screws, nuts and washers in a compartmented box for £1. If you want bigger size B&Q or a fastener company for quantity.
Re your holding in Touchstar, I once worked with the man who started the company as Belgravium back in the eighties, brilliant engineer. I was just last week thinking of a stake and they announced the placing so I'll maybe wait and see if any are sold afterwards.
On another note, my first employment was as a student for Henry Boot in the early sixties on a local building site, knackering work at £10 a week but paid for a holiday and the best motivation for a decent job later. I might buy a few there sorry I don't have any more up to date info.
I'll probably get some thumbs down but you started the washer thread Paul lol. Recently renewed my subs, thanks for last year and here's to another.

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Andrew L 18th Jan '18 38 of 49

In reply to post #300653

Edison note out and worth reading. This is certainly disappointing as an own goal in the core business. It may lead to higher costs going forward. Crux is whether it reflects a wider issue or if they have nipped the problem in the bud. Hard to say really.

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ridavies 18th Jan '18 39 of 49

In reply to post #300458

Hi. Re EMIS (LON:EMIS). Maybe some history there, so maybe holders believe that there are more serious issues with management controls.. I may be mistaken but I did hold them for a while, and I believe they had major problems with a DVLA project. Another thing they support is support for GP practices information systems for patients. I use it all the time. Very good. However, they have stood still really. One of the Small Company Sharewatch major recommendations and also they added it to their latest portfolio where it is one of the poorest performers.

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DJCP 18th Jan '18 40 of 49

In reply to post #300643

Re: IFRS15

If this could become a way of picking up affected companies - for good or bad investment analysis, then a bookmark of a search which you can open daily/weekly etc. could help.

(hopefully links to 'other' sites are allowed here)
There are two links, as some announcements have a space and some not - e.g. IFRS15 and IFRS 15.

There are only 4 so far this year, but gajri's commented on why this should increase during the year.
11/1 - Ultra Electronics (ULE)
17/1 - Utilitywise plc (UTW)
18/1 - GetBusy PLC (GETB)
18/1 - Capita PLC (CPI)

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Mrken 18th Jan '18 41 of 49

A question from a relatively newcomer. Are trading updates released on an ad hoc basis or is advance notice usually given ??Thankyou.

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daveinthelakes 18th Jan '18 42 of 49

In reply to post #300773

This is an extract and link that was kindly put up on yesterday's SCVR by gsbmba99-

(, you get a listing. You can also use this feed to check "UK Shareholder Meetings Calendar - Next 7 Days" and "UK Dividends Calendar - Next 7 Days". I think they are updated daily.

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Effortless Cool 18th Jan '18 43 of 49

In reply to post #300773


Different companies have different practices; some give a date in advance, some just release the update without warning. For the latter, the timing of trading updates in previous years is usually a good guide as to when to expect them.

Of course, if a business is trading materially better or worse than market expectations, then even companies that usually give advance warning may have to spring an update on the market.

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gus 1065 18th Jan '18 44 of 49

In reply to post #300773

Investegate also provide a diary of forthcoming company announcements/events split by Trading Update/AGM/Final Results and Ex-dividend date. Usually available for the following day/week and month.

Not infallible but usually reasonably thorough. Sample linked below:-


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john652 18th Jan '18 45 of 49

In reply to post #300733

Thanks Ratioinvester.

Useful report from Edison. Having worked for many years with large IT projects and SLA's, £9m for some low level bugs that were not fixed within the SLA looks like a very high charge to me & millions of operational costs for the next two years doesn't ring true for increased bug fixing or whatever they need to do. I'm in two minds, this seems like a bump in the road, but not sure.

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xxx 19th Jan '18 46 of 49

In reply to post #300643

Interesting. As you hint, this may have significant relevance for Dixons Carphone.I have found with Dixons Carphone, revenue recognition elements were rather opaque, with concerns on the reliance of selling insurance, rather than the products themselves. Perhaps it will be clarified by this. Recently, the FD Howard Stringer announced that he is moving to M+S.
From its inception, I thought that the CEO, Seb James, was sold a dummy by the hard nosed team at Carphone Warehouse. We will see what he has apart from being posh and positive.
Trading update next week.
[Longterm holder ugh]

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Carcosa 19th Jan '18 47 of 49

In reply to post #300493


I raised this subject last November which you can read here: Rolls-Royce Holdings (LON:RR.) are clearly not best pleased!

I subsequently contacted a few companies and got the following replies:

accesso Technology (LON:ACSO) Differences to be relatively minor and we don’t expect it to require analysts to revise their numbers.

Avation (LON:AVAP) No impact

Bioventix (LON:BVXP) Does not report under IFRS rules (but will they have to????)

Fairfx (LON:FFX) No effect

Hutchison China MediTech (LON:HCM) Extensive disclosures already done (But I don't really understand it!!.. See their AR)

PCF (LON:PCF) No effect: New standards IFRS16 and IFRS9 will apply

IQE (LON:IQE) By far the most 'wishy washy' reply I received, enough to spook me into selling my shares (fortunately!). Makes me wonder if this is partly the justification as to why this share is heavily shorted.

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Ramridge 19th Jan '18 48 of 49

Hi Carcosa - RE. IFRS 15 Revenue Recognition Standard
Clearly I was distracted when you posted your excellent note on 20/11/17.
The standard becomes effective for reporting period on or after 1/1/18, which means it is still too early to see actual published accounts made up to 31/12/18 under this new standard. It will be interesting to see exactly what they disclose/ don't disclose and how they present the changes.
Just to be clear, my understanding is that this affects only those companies which do report under IFRS . There are a large number who do not.

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Carcosa 19th Jan '18 49 of 49

In reply to post #300898

You are correct. However many companies started to provide guidance on IFRS 15 and its potential effect on the companies last year. You may not necessarily find it in RNS's but you will find them in their Annual Reports and sometimes Interim Reports; often hidden away as a note to the financial statements.

So all I can suggest is that if you have concerns about a specific company to check their reports and if nothing is apparent, write to the FD directly.

You are correct that it only affects IFRS reporting companies but I was surprised that BVXP are still using IAS's given the financial size of the company (but few employees; is that the reason why?)

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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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