Small Cap Value Report (Thur 23 August 2018) - TRCS, FUL, SPE, MACF, WEY, ARC | Graham Neary

23rd Aug '18 by Graham Neary

57 comments 15465 reads

Good morning!

Today we have:

Fulham Shore (LON:FUL) - AGM statement and trading update
Sopheon (LON:SPE) - half yearly report
Macfarlane (LON:MACF) - half year report
Wey Education (LON:WEY) - trading update
Arcontech (LON:ARC) - final results

Tracsis (LON:TRCS)

Share price: 723p (unch.)
No. of shares: 28 million
Market cap: £205 million

Before we get into today's news, I'd like to mention that John McArthur (CEO of Tracsis (LON:TRCS) ) joined us in the comments thread for yesterday's report.

I had said that I wouldn't pay its high valuation multiple for any company in its sector, and Mr McArthur asked me to explain.

The simple answer is that I viewed Tracsis as a transportation consultancy, software and hardware business, on the basis of what it says on its own website, and having browsed the websites for its various services.

Speaking to Leo in the comments, Mr McArthur writes:

"We are not a 'software consultancy' business but simply a technology business in its purest sense i.e. we are first and foremost a software company that develops and licenses over a dozen software products which we own all the IP for. We were originally a spin out from the University of Leeds School of Computing and employ over 100 full time professional software developers who generally have very strong maths/physics or engineering backgrounds. Latterly we have also developed our own hardware and now also do a variety of data capture work using all sorts of novel technologies.

I understand the point you are trying to make about consultancy businesses and 'people businesses' but this simply isn't the case with Tracsis. The vast majority of our profit is derived from long term, software licensing contracts with blue chip customers and less than 10% of our income is consultancy. The consultancy we do undertake is highly specialised and is generally derived from doing bespoke projects by using our own products which will be similar to all software companies."

It's always helpful to hear things from management's point of view, so thank you very much John for putting this across!

Within reason,…

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Wol

23rd Aug '18

Sometimes you wait for days for an interesting RNS and then three come along at the same time. If you can Graham I’d be interested in:
Arcontech (LON:ARC) - I hold
Sopheon (LON:SPE)
Wey Education (LON:WEY)
Many thanks

runthejoules

Good morning Graham! I know I'm sad getting up at 6.30am but if the placeholder is here by 7am I do appreciate the views and updates of other investors and the chance to request and comment, thanks!

Wey Education (LON:WEY) - I still think they've bitten off more than they can chew but this in-depth TU does show they seem to be trying to explain what they're up to and why to address the SP's plummet. I hold a small amount (it wasn't at one point!) knowing international expansion remains a gamble.

Fulham Shore (LON:FUL) announces encouraging revenue increases, but nothing on staffing costs, I'd imagine Brexit has made this difficult.

Sopheon (LON:SPE) growth of 27% for Revenue, 62% PBT and 27% EPS, but is it mostly in the price? After selling at 600p think I missed this one!

JonBirdy

Hi Graham

I’d be interested to hear your thoughts on Wey Education (LON:WEY)

Turnover is reported up 70% and expected to beat expectations for y/e 31 August, both through acquisition (Academy 21) and their original InterHigh business. Looks like good integration of Academy 21, as reported previously.

Jon

MrContrarian

My morning smallcap tweet: Boringly good, no bloodbaths today.

Wey Education (LON:WEY), Sopheon (LON:SPE), Arcontech (LON:ARC), Toople (LON:TOOP), Fulham Shore (LON:FUL)

Wey Education (WEY) Guides FY rev above market expectations of £4.1m, 'underlying profit and loss' [eh?] in line with market expectations. Exp adj. pretax £400-£500k.
Sopheon (SPE) H1 rev up 27%, prertax up 55%. "Group is trading comfortably in line with market expectations."
Arcontech Group (ARC) FY pretax up 54%, ahead of expectations. Rev up 9%. Final div 1.3p (1p). Outlook "We have added additional sales resource to increase our focus on new business growth and while this will add to our cost base we believe it will generate positive results in the near future. Our pipeline of prospects remains positive..."
Toople (TOOP) Wins contract reseller to provide fibre broadband and cloud based telephony services for two of the reseller's national high street retail customers. Needed because BT will scrap old tech copper lines to the shops by 2025. The contract is expected to provide significant revenue opportunities. That's vaguely nice. No numbers.
Fulham Shore (FUL) trading: encouraging revenue increases in both Franco Manca and The Real Greek in the first 21 weeks of FY.

Graham Neary

I hear you, rtj!

Yes, I'd like to cover all three of these, see what I can do. G

InvestedGeordie

Good Morning Graham,

The below, from FinnCap's morning note, may assist those interested in Sopheon (LON:SPE)

Interims set the pace for another good year

Interims to June confirm continuing strong performance identified at the July trading update, achieving 51% of forecast FY revenue (1H17: 44%) and 58% of FY EBITDA (1H17: 38%), with visibility over FY contracted revenue already at 88% of full-year expectations (71% this time last year). Net cash is very strong at $15.5m, with 84% of FY free cash flow expectations achieved through the unwind of a build-up in 4Q17 working capital typical of a model which remains dominated by perpetual licences. Forecasts are unchanged and de-risked, leading us to review our target price to 1295p (1000p), equivalent to an FY19 EV/EBITDA of 17.5x.

Thanks,

IG

Disclosure - I hold a long position in Sopheon (LON:SPE)

LeoInvestorUK

Wey Education (LON:WEY) - WH Ireland note out today. I haven't read it yet but the headline is "Significant progress, net cash ahead, moderating FY19E forecasts".

DGBell

For those who live outside London , like myself, you can download free each day’s papers from the city am website. I find it a useful business summary and it often covers small caps. What appears on the website cityam.com is no where near as much as is on the newspaper download.go to the drop down menu and you will see latest paper under city am links.

ridavies

Hi DGBell. I am probably being thick but could you take me through the process you describe point by point. I couldn't get there following what I thought you were saying! Best regards and thank you for potentially a very valuable link. Best regards

FREng

It works for me. Go to cityam.com. Hover over the City AM logo (top left, with three horizontal bars). In the drop-down that appears, go to the "City AM Links (bottom right) and click "latest paper", then click "download pdf".

fwyburd

You'll find it here
http://dev2.cityam.com/assets/uploads/content/2018/08/cityam-2018-08-23-5b7df6f0f371c.pdf

cheers
Francis

Effortless Cool

Macfarlane (LON:MACF), please. More good results today from this under-rated business that just keeps delivering year after year.

https://www.investegate.co.uk/macfarlane-group-plc--macf-/rns/half-year-report/201808230700056204Y/

peterg

It works in Edge, but not in Chrome

... and in Firefox.

laurie

Re: City AM
http://www.cityam.com/edition will give you the day's paper, plus archive

wildshot

Another vote for Arcontech (LON:ARC) please, it is on my watchlist. After a quick scan of results it looks like positive results.

http://www.cityam.com/edition
Probably should have posted that link in the first place!

Small Cap Value Report (Thur 23 August 2018) - TRCS, FUL, SPE, MACF, WEY, ARC

Tracsis (LON:TRCS)

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Graham Neary

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