Small Cap Value Report (Thu 6 Aug 2020) - JOUL, DLAR, FUL, HMSO, D4T4, DPP, WHR

6th Aug '20 by Paul Scott

75 comments 9890 reads

Good morning, it's Paul here with Thursday's SCVR.

Please see the header above for company announcements I'll be reviewing today.

Comments section - I don't moderate the comments, that's done at Stockopedia HQ. They're a lot more lenient than I would be. This is not an advfn or LSE free-for-all, we like to keep the comments here courteous & constructive. If someone else posts something idiotic, please just ignore it. Replying tends to start off an unwelcome chain reaction. Many thanks.

Estimated timings - I got bogged down in JOUL, so will carry on until about 3-4pm to cover everything else.
Update at about 16:40 - today's report is now finished.

Joules (LON:JOUL)

Share price: 98p (up 4% today, at 08:57)
No. shares: 108.1m
Market cap: £105.9m

Annual Results

Annual Results for the 53-week period ending 31 May 2020

Established in Britain by Tom Joule three decades ago, Joules is a premium lifestyle brand with an authentic heritage... a true multi-channel lifestyle brand; its products are available through its e-commerce websites, retail stores, at rural shows and events and wholesale channels both in the UK and internationally....

Joules carefully designs and sells clothing, footwear and accessories for women, men and children. The business also sells ever-growing collections of homeware, eyewear and lifestyle product ranges through both its licensing partnerships and 'Friends of Joules', the brand's online marketplace that brings together hundreds of creative businesses to give customers everything they could ever need for a contemporary country lifestyle.

Background - This is an interesting share to me (no current position) because it sells about half of its product online. Next (LON:NXT) showed us how this is the way to go. Next is a rare success story in retailing, because it migrated so much business online (more than half).

Joules messed up its website distribution, warning on profits (significantly below mkt exps) which I reported on here, on 10 Jan 2020, hitting the share price 21% down to 179p.

Then covid hit of course. It announced a £15m placing, at 80p per share, and £15m extension to bank facilities, which I covered here on 3 April 2020.

The stores had to close, but online trading was described as better than revised expectations. Regular updates have been provided throughout the crisis. All stores closed…

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spglet

6th Aug '20

Thanks the reply Paul. I understand.

Paul Scott

Hi PUG!

I've had a quick look at Intelligent Ultrasound (LON:MED) interims , but am not enthused to want to dig any deeper, it looks too speculative, and I don't have the expertise to guess whether its loss-making operations would eventually move into profit or not?

The StockReport shows a sea of red, with revenues rising from £1.8m to £6m over the last 5 years, but multi-million (rising) losses over that period too.

On the upside, it's now got pots of cash after a recent fundraising.

Today's update says it's aiming for profitability next year. I wish them well, but there's nothing I can add, as I know nothing about its products, hence no idea about its future prospects.

Hence I can't add anything more, looks like something for investors with the specialist knowledge to determine what its future prospects are.

Sorry about that , Paul.

MarkER

Can anyone let me know please, if there is any way of finding out when the upcoming results of AGM's are due out? I know how to find out when trading statements/results are due out, as there are lists published, but i noticed that Paul has reported on DLAR today, which was an AGM statement and these don't seem to be included in the list.

shanklin100

Slightly bizarrely, at 14:10, Jarvis Securities (LON:JIM) issued an RNS mistakenly titled "Director Declaration". In fact, its a dividend declaration, for a 3rd quarterly dividend of 14p, ex-div on 20-Aug-20.

https://www.investegate.co.uk/jarvis-securities--jim-/rns/director-declaration/202008061410294049V/

Given the completely matter of fact wording, it sounds like this may set a new benchmark for JIM's quarterly dividends. In contrast, the last dividend, which was 11p came with caveats making it sound like we should not expect the same going forward.

Extrapolating, which may not be valid, this implies an annual dividend of 56p, or over 8% at the current SP of £6.60.

I suspect something has to give here as, if this is a sustainable dividend, the SP is currently too low IMHO.

N.B. I'm definitely biased as this is my second largest holding

barnetpeter

DLAR...I hold from the placing. The year high is 235.5p and I admit I am impressed by the change in fortune. I would guess the results will be better than expected and directors are being a bit coy. So much business "in the bag" means they can build even more profitable turnover. I can see these back well above 200p this year and I struggle to see much downside myself but thats just my opinion.

davidjhill

I presume it is because it is specifically designed for the likes of laptops, phones, VR headsets etc where you get very rapid charging at the same time.

Not particularly bothered about competition personally. This is a sideline for Immotion (LON:IMMO) but if they are seeing extraordinary demand for it then that suggests nothing better out there right now. They don't have to own the market in UV cleaning, just take some of it to make a very meaningful contribution. It could be applied to millions of venues worldwide so plenty to go after. Think Unis, schools, theme parks, conference venues etc but also something like Bowling alleys for example.

What is interesting here is that there is nothing baked in to the share price for this. The whole thesis of investing in Immotion (LON:IMMO) is around the VR content. So this is just in there for free. Usually anything Covid solving gets the market very excited and share prices get too high too quickly, so of course the risk is investing at the top of something that may or may not work. This seems to have completely passed the market by and I do wonder if there could be a meaningful re-rating at some point.

I have a reasonable chunk but haven't bought any more yet, though I have to admit I am tempted. Risk/reward looks decent to me as this new element to the business actually hedges against a second wave shutting down some of their VR sites.

ISAallowance

"Anyone else getting tired of placings at monumental discounts? SAE the latest culprit this morning."

I'd never heard of SAE until this morning, but from a quick glance at the stockreport...

* It's made a loss in all except one of the last 6 years, and is forcast to continue to be loss making for at least the next 2.

* Operating cashflow has been negative in every one of the last 6 years.

* It has significant net debt.

* Its cash is significantly less than it's operating loss last year and the year before.

* The Stocko computers clasify it as a momentum trap.

* Edit: Forgot to include originally, the share count has increased every year for the last 6 years.

Frankly, given the sudden rise in the share price over the last couple of months and its obvious need for cash I'd have been amazed if they hadn't taken advantage in order to get a placing away!

mesb

Thanks Paul. I hadn’t focused on management motives.I feel a bit of a muppet now, the CEO of SAE has only £10k of shares so, even if he no doubt has loads of options, he will be less sensitive to dilution. Argh!!!

jonthetourist

Hi Paul

You asked for feedback on D4T4 and haven't had any, so I will have a go. All imho.

Way back at Pilot your marketing / merchandising people would have had feedback from stores (I imagine) over and above the actual sales numbers. E.g. lots of people trying item x but complaining about the fit, asking if it's available in colour A or B etc.

D4T4 's aim is to not only give this sort of feedback, but respond to it in real time in what is presented to the browsing online potential client, to maximise sales outcome. So the client gets both better market intelligence, and a higher revenue per site visit.

This software solution had been selling well on a classic sale and support contract basis. Transitioning to an annual contract substantially reduces the revenue in year one, but increases it in every subsequent year. Having chaired a software house myself, I think that counter-intuitively Saas is a better quality sale. The client spends less upfront, but is fully aware they are committing to an expensive long-term relationship. Regardless, during the period of transition revenues will be artificially depressed as a reflection of trading.

Very Janet and John overview, but hopefully helpful to some.

All the best

Jon

with respect, ISAallowance, even if the points you make are valid, you could make the same comments about a lot of companies in the small cap space. The main point for my post however was that I think the time for the 20% limit on pre-emption rights being waived is past time. I could continue, from your comment this is not a company you follow, but I am respecting Paul’s request at the start of the day.

smegster

Hi Paul,

Re: £D4T4

A couple of video which may be of interest. A short video (6 mins) explaining what Celebrus ( £D4T4 main product) tries to do

D4T4 - Creative Visualisation: Homeowner - December 2018

A longer (52 mins) demo of Celebrus

Celebrus v9.2 WebCast

GrahamF

Re SIMEC Atlantis Energy (LON:SAE)

It’s a different business now to what it was a few years ago, but as you say still loss making and consuming capital.

Their tech to harness the power of tidal flows works and it is an attractive form of green energy as it is completely predictable unlike wind and solar. Problem with it is that it’s too expensive and the cost of wind and solar have dropped so far it looks even more expensive. So, the subsidies that it needs have never arrived.

The other, newer part of the business is another green energy business, in this case energy from burning waste pellets and they are converting Uskmouth Power Station to do that. However, it is also intertwined with the GFG Alliance group which seems to have a complex and difficult to understand structure.

So, very difficult to see when any of their projects will turn a profit, however, it is the sort of business where a sudden change could happen due to a change in subsidies etc. and you cannot extrapolate that from historical numbers.

So, quite an interesting green energy business (something I like) but uninvestable in my view until there is news that will create a step change in performance. (The demise of another green energy business, the Swansea tidal lagoon project, shows just how tricky these things can be).

bryaz

absolute belter this year up 45% this year without divi included

Thanks for posting, Graham. It seems to be on the cusp of something, but today’s hammering of the share price is a bit of a reality check. Probably I should not have posted on here, it’s too much like an energy/mining stock when I think about it.

kellys_heroes

I agree with jonthetourist comments. D4t4 Solutions (LON:D4T4) is transitioning from a classic "fixed price" model to a modern/fully integrated SaaS offering a fuller suite of service to clients (more committment + recurring revenue). Data and Digital transformation are a great combination. They work direct and via resellers (good as long as those partners reflect the same quality of service). Their latest version includes ML and NLP capabilities. Lets see if this has a positive impact on their margins (which at 22+ already reflects a niche positioning). A couple of concerns are their past reliance on 1 big, key client (still the case?) and Stocko's m-score rating (earnings manipulation). On a PE of just over 20, there's still some value to be had.

PS; I am not a holder but used to work in a similar software service industry.

Hope this helps!

PUGUGLY

7th Aug '20

Thanks Paul - Agree re cash - As current main revenue comes from selling training modules - one off capital purchase - depends very much on degree of market penetration still available - plus development of new modules for different applications - However as Ultrasound probably the most used primary scanning technique world wide thre are a lot of technicians who could find update training useful

The AI tools being developed should aid the technicians in their performing ultrasound scans and hence corporate revenue but revenue looks as a though dependent on OEM's installing the software on royalty basis. Revenue here is I suspect likely to depend on how many OEM's chose to adopt and the terms of the licence/royalty agreements - No details that I have as yet been able to uncover.

However very much under the radar subject to a short Covid related jump on news that some of the tools could be useful in interpreting scans of patients' lungs.

mojomogoz

The gross margin per unit is more like 80%

SmallCappy

Thanks Shanks. Been expecting a divi declaration but disregarded the rns titled Director Declaration. World aint get any easier

Splode

Many of us get our company news flow from investgate.co.uk. If you look at the list on this site for DLAR you will see there was a notice of DLAR's AGM published on 13 July. This website is extremely useful and can be used to only list the news of companies you are interestred in.

Tonysaparito

8th Aug '20

Hollandsmith..your work is excellent but it would be very interesting to know what your charts are saying about the companies you are covering...i e your personal view via your charts...regards.tony

Small Cap Value Report (Thu 6 Aug 2020) - JOUL, DLAR, FUL, HMSO, D4T4, DPP, WHR

Joules (LON:JOUL)

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Paul Scott

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