Small Cap Value Report (Thu 8 Mar 2018) - CWD, CVR, FUL

Wednesday, Mar 07 2018 by


It's Paul here. Today I shall be covering results from;

Countrywide (LON:CWD) - results - bank covenant worries - needs a fundraising.
Conviviality (LON:CVR) - massive 59% drop in share price - overdone? Maybe, but Graham foresaw it! So a hat-tip to my co-writer here.
Fulham Shore (LON:FUL) - mild profit warning - horrible sector.

(the above list changed during the day, as profit warnings are more interesting than in line with expectations results)

Just to flag that Tuesday's report, and Wednesday's report, are now finished, with extra sections added. Sorry they were rather slow in emerging.

Countrywide (LON:CWD)

Share price: 83.75p (down 5.8% today, at 14:18)
No. shares: 237.9m
Market cap: £199.2m

Preliminary results for 2017

This is a large chain of UK estate agents.

The narrative is particularly interesting, as it squarely lays the blame for the group's poor performance at the door feet of the recently departed CEO. The Chairman has taken over for now, rising to Executive Chairman, with a "back to basics" strategy change. Here's a flavour of the commentary today;

Industry expertise in all areas of our business is key. Within Sales and Lettings, the previous strategy resulted in us losing a lot of that expertise.

In the Group, we are fortunate in that we have an industry veteran, Paul Creffield, who has been promoted to the role of Group operations director. His deep understanding of the market and operations means that we have quickly been able to identify what we need to do to begin addressing our under-performance.

I am greatly encouraged by the number of high calibre industry business leaders that we already have within our Sales and Lettings business and a number of similarly experienced and high calibre industry people who previously left us and want to rejoin now that Paul is in this role.

Let's look at some key numbers for calendar 2017;


I've left in the footnotes, so you can see that the "underlying" figures strip out quite a lot of items. However, these are all fairly usual items. It's important to remember…

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Countrywide plc is an integrated, full service residential estate agency and property services company in the United Kingdom. The Company offers estate agency and lettings services, together with a range of complementary services, and has a presence in areas and property types which are promoted through locally respected brands. The Company operates through four segments: Retail, London, Financial Services and Business to Business (B2B). The Retail network combines estate agency and lettings operations. The London division revenue is earned from both estate agency commissions and lettings and management fees. The Financial Services division receives commission from the sale of insurance policies, mortgages and related products under contracts with financial service providers. Business to Business services comprise all lines of business, which are delivered to corporate clients, including Surveying Services, Conveyancing Services and revenue from Lambert Smith Hampton. more »

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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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The Fulham Shore PLC is engaged in the management and operation of The Real Greek, Franco Manca and Bukowski restaurants in the United Kingdom. The Real Greek food centre serves dishes of Greece and the Eastern Mediterranean. Franco Manca serves Neapolitan sourdough pizza, which is baked in a wood burning brick oven. Bukowski is a London-based, charcoal-grill restaurant and bar, serving breakfasts, burgers and grills. The Company operates 45 restaurants, comprising 32 Franco Manca, 12 The Real Greek, and one Bukowski Grill franchise in Soho. The Company’s subsidiaries include Kefi Limited, FM6 Limited and Souvlaki & Bar Limited. more »

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

85 Comments on this Article show/hide all

jonthetourist 9th Mar '18 66 of 85

Hi Paul

I wonder if there is a way to pass the baton on, yet still retain much of the value that you deliver to your readership here.

My suspicion, as a man with a low boredom threshold myself, is that ploughing through detailed reports on companies that you wouldn't want to invest in must be tedious. If so, how about you do one review of the week just gone highlighting anything you thought looked potentially interesting, and why?

It must be less tiring to write about companies you like the look of, I would think. And weekly takes away the pressure of the daily deadline, in that you will still be scanning results, reading discussion here etc. but you can write about shares that got your pulse to quicken only when the mood takes you. And if nothing leaps out you can say so, and wait for the following week.

Just a suggestion, and I hope not presumptuous. I am sure most of us would like to keep you contributing if at all possible, but you have done your years before the mast.

All the best


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leoleo73 9th Mar '18 67 of 85

In reply to post #335723

mammoko, re Conviviality (LON:CVR) , actually I think you are right - a 60% price fall can only really be explained by concerns over gearing. However I think these are unjustified as (based on the real forecasts quoted by Paul rather than my made-up figures), the tested ratio is now 1.7-1.8x.

At 100p they look cheap (updated PE of maybe 5.5) and I have bought. Convenience retail is a structural growth area with the death of out-of-town shopping (bizarrely often characterised as the death of the high street) and the return of town / city centre living (aided by by planning changes, population pressure and closure of legacy shopping). For the same reasons I think the current casual dining rout is cyclical oversupply rather than structural and will turn around in 2-3 years.

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cojode 9th Mar '18 68 of 85

Hi Paul
2 points
1. A huge thank you for your efforts on this site and the insight that you provide. I have followed the usual suspects over the years (Simon Thompson,TW et al) and have lost more than I have made from their "tips". Your forensic analysis continues to be the only "public" review of company performance that I follow. Good luck with whatever you decide to do.
2. With regard to Fulham Shore (LON:FUL) I have some doubts as to their strategy of taking space in Debenhams (LON:DEB). I used to run a bunch of retail companies in the middle east and spent some time in negotiation with a household name American Supermarket chain who were interested in bringing some of my brands into their superstores. It was obvious that the RPF was low and it was an opportunity for them to extract some rental income from an unsuspecting(?) tenant. We did not pursue the project. One of the key problems with opening a store/restaurant in a much larger unit is the loss of brand identity (unless the footage is prominent 'front of house'). If for example, £.JLP sold/franchised their coffee shops to "Latte R us" would you arrange to meet a friend in "Latte R us" or continue to "meet for a coffee in John Lewis". I suspect the latter. If the footage isn't working for the host retailer then why should it be any different for the tenant? The fact that the host retailer is Debenhams (LON:DEB) which is a failing brand in itself is also something of a concern.

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xcity 9th Mar '18 69 of 85

Conviviality (LON:CVR)
This update has triggered a calamitous fall in the share price today of 59%. It's doubly annoying for shareholders when a profit warning is issued during market hours. Apparently there is a compulsion on companies to issue bad news to the market as soon as they become aware of it. Surely the process could have been managed better by the company - e.g. by calling a board meeting to discuss current trading after the stock market is closed, then issuing the RNS at 7am the following morning? Most companies seem to be able to manage that, so an intra-day profit warning just reinforces the impression that management may not be in control.

Let's imagine that the FD found out during the day and informed the Board who deferred actually meeting until 5pm and announced at 7am this morning. IC recommendation came out. Investors bought (some placing opening limit orders the night before). Company can then be sued for not releasing the info. It's not nice for us when it happens during hours, but they have no choice sometimes.

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Bonitabeach 9th Mar '18 70 of 85

In reply to post #335698

So the management were in the dark about the financial performance of the business?

Returns on Equity, Assets and Capital Employed all on the slide over a number of years (see StockReport) - margin so thin a puff of wind from the wrong direction could blow it away.

From the company's website:

"The Board is responsible for establishing and maintaining the Group’s system of internal control and for reviewing its effectiveness. The system is designed to manage rather than eliminate the risk of failure to achieve the Group’s strategic objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

The Board has reviewed the effectiveness of the Group’s system of internal controls and has considered the need for an internal audit function. At this stage the Board has decided that an internal audit function is not required as the Group’s internal controls system in place is appropriate."

Enough said.


No position.

P.S. I do feel aggrieved for investors who are let down like this by incompetent management that appears to have overstretched itself. This is always a risk following a large acquisition, paricularly by a smaller business. Management are quick to grab the credit (and bonuses) when things go well - they deserve the responsibility when things go wrong.

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Edward John Canham 9th Mar '18 71 of 85

Conviviality (LON:CVR)

The Investors Chronicle's tip of the week has now been updated by a sell note.

From buy at 305p to sell at 103p in less than 24hrs.

I really love it when a plan doesn't come together!


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dgold 9th Mar '18 72 of 85

Just to add my vote of thanks to Paul for his articles - they have been incredibly helpful.

And I agree with previous suggestions that it might still be of interest to Paul to write once a week or on an ad hoc basis when something of interest comes up - we will certainly be happy to hear what Paul has to say even if it's only on an irregular basis.

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Metatron 9th Mar '18 73 of 85

Fortunately I operate an automatic trailing stop loss system.
Convivality looked to me a buy and hold `growth & income` stock. but your instincts only need to get it badly wrong once and it is a long way back
Unless you are Warren Buffett be very cautious about picking `buy and hold` stocks

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ricky65 9th Mar '18 74 of 85

In reply to post #336223

I think that's sensible. I don't use an auto trailing stop loss as my broker only allows to put it in pence instead of a percentage, so it naturally tightens as a stock price increases (good as useless imo). Instead I use a manual trailing "back stop". I review them at least once a week.

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ridavies 9th Mar '18 75 of 85

Oh dear, Mr Scott! (That's for me). Oh good, Mr Scott (that's for you, the signs have been showing). I'm old enough to respect that health is the real wealth, although it is tough to prove that 'no money' can buy happiness. However, I guess - and hope - that you are not actually poor, and that you have earned some benefit yourself as well as dispensing a lot of benefit to we enough to have a few business class trips in your planned travels. I will seriously miss your thorough analysis from which I have learned such a lot. I believe you are irreplaceable, not because you are perfect but because we have all become used to the qualities and style of your offerings and that would be too hard an act to follow. I hope that Ed and Co do continue with this very thorough SCVR with the appropriate staffing - 2 people of high quality, including hopefully Graham, so that it really doesn't become a burn-out experience for your successor. Come to think of it, don't know how you have continued with it for so long. If you can continue in some way, as has been suggested in other contributions, then we will all be the richer. If not, then I hope at least to have the opportunity to buy you a drink at Mello Derby before you become totally paralytic after consuming drinks bought from all those further up the queue wanting to do the same. Very best wishes for your 'retirement'.

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Zipmanpeter 9th Mar '18 76 of 85

Thought for Ed and Stockopedia team, if Paul does withdraw from SCVR, would it be possible to persuade him to lead a specialist WEEKLY column on RETAIL (could include everything from all online to F&B)

Having avidly read for SCVR report for over 2 years now including all feedback, I would suggest this would be popular with the average private investor using Stockopedia and cost/time effective for all parties ie columnist, Stocko and readership. Whilst ethos is DYOR, ordinary PIs need entertainment as well to keep forking over for Stockopedia !)

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clarea 9th Mar '18 77 of 85

In reply to post #335883

Been there myself Gus these days I put in about 30 hours per week and bit of trading would rather have less cash and less stress, key is not to have to much debt as that puts the hammer on freedom.
Out of interest do you trade full time you seem one of the more clued up posters on here ?



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clarea 9th Mar '18 78 of 85

In reply to post #335683

Like the other Paul wish you the best with whatever you decide I reckon your trading life would make a great read if you do pen a book remember you and your blash strategy from the Mike Walters days.
In the perfect would Rob Burns would make a great third addition to join you and Graham to reduce your work load unfortunately I feel he to will soon be riding off into the sunset, like yourself another guy who has helped the little guy learn a lot.

Hopefully you will remain around to pop in now and again in some form best regards.


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Paul Scott 10th Mar '18 79 of 85

In reply to post #335983

Hi JonTheTourist,

My suspicion, as a man with a low boredom threshold myself, is that ploughing through detailed reports on companies that you wouldn't want to invest in must be tedious. If so, how about you do one review of the week just gone highlighting anything you thought looked potentially interesting, and why?

That's a really good idea - I very much like the idea of me writing one article per week, focusing on the companies which I like the look of the most. Let me speak to Ed about that. The idea is that I'll still be around here on Stockopedia, writing articles in some new format, just probably not the daily SCVRs. Although I'll probably still be around to cover for Graham's holidays, or during the busiest reporting season.

Thanks for the kind comments from everyone too, much appreciated. We get such positive feedback all the time from SCVR readers, it's very rewarding to know that people find mine & Graham's work helpful.

Best wishes, Paul.

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Paul Scott 10th Mar '18 80 of 85

In reply to post #336058

Hi cojode,

I think you might have got the wrong end of the stick, re Fulham Shore (LON:FUL) taking space in Debenhams (LON:DEB) stores. The space being taken by FUL is at street level, with a street frontage, and its own separate doorway. So you wouldn't actually notice initially that the Franco Manca pizza restaurant is within a Debenhams store, because it looks totally separate, with its own shop front & own entrance. I'm basing this on the Bournemouth & Reading sites within old Debenhams space which I have visited recently. There is also an internal door, or archway, so that customers can move from Franco Manca into Debenhams, and vice versa, but most trade is people walking directly into Franco Manca, from the street, and not even being aware that they're technically now in Debenhams.

It seems to me a sensible move, whereby DEB gets a rental income from some of its prime ground floor space, and FUL gets a decent new site, in a high footfall area, probably on attractive rental terms (I would imagine DEB probably give them a decent rent-free period, at least).

I've recently opened a new long position in Debenhams (LON:DEB) because I think it's quite interesting the way they are filling some of their surplus space with outside companies, providing restaurants, and other things - e.g. I saw an article saying that DEB will convert & sublet some of its upper floor space into workspaces for small companies. That seems a great idea to me.

Regards,. Paul.

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iwright7 10th Mar '18 81 of 85


I am very pleased to hear that you wont be leaving us completely. Unlike reading the Investor mags your writing has taught us how to think like a business analyst, weighing up the available information before coming to a view. Long may it last in whatever new format that evolves. Ian

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jonthetourist 10th Mar '18 82 of 85

In reply to post #336603

Hi Paul

Glad you like the idea.

To use an analogy from another industry, it's like being promoted from reporter, sent to follow stories wherever they occur, to columnist, expected to contribute an insightful opinion piece on whatever catches your attention. The job still comes with pressure, but of a very different kind.

And for us, your readership, we get to keep the best of what you bring to the party - brilliant analysis driven by a sense of comradeship with fellow investors, and untainted by self-interest. If that comes at any personal cost to you, I don't think we can really enjoy it. So we are all invested in finding a better way of utilising your talents.

All the best and see you at Derby.


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Fangorn 10th Mar '18 83 of 85

Paul has called the top!
Correctly imo.
We have spent the last 10 years in a QE debt financed bubble

We have crossed the rubicon
Fat lady singeth soonish.

It'll all be blamed on brexit or Trump or whatever.

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xcity 11th Mar '18 84 of 85

Conviviality (LON:CVR)
IC now say "our faith in management is shattered ... our confidence in a near-term re-rating is low. Sell at 103p."
It seems hell hath no fury like a journo embarrassed

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Reynart 12th Mar '18 85 of 85

Seeing Paul's comments about semi-retirement made me realise one of the reasons I have appreciated the SCVR - his combination of insightfulness and no holds barred dissection of management guff reminds me of the "Weekly Shop" from Seymour Pierce's Richard "Ratty" Ratner which was great fun till his premature death 10 years ago. So Paul - how about a Weekly Shop every Monday? If you were prepared to add in regular reviews of the best chocolate éclairs on the market that would make me really nostalgic.......

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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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