Small Cap Value Report (Tue 23 July 2019) - IDOX, TUNG, BKS, NXR

Tuesday, Jul 23 2019 by

Good evening/morning, it's Paul here.

Let's start off with a couple of stragglers left over from Monday's RNS.


Share price: 29.4p (down c.14% yesterday, at market close)
No. shares: 415.5m
Market cap: £122.2m

Half year report

IDOX plc (AIM: IDOX, "Idox", "the Company" or "the Group"), a leadingsupplier of specialist information management solutions and services, today announces its unaudited half year results for the six months ended 30 April 2019.

This software group seems to be permanently restructuring. The heavily loss-making digital division is now gone.

Forecast reductions - there's not a lot of point in analysing the interim results, as there seems to be an H2-weighting. So we cannot just double the interim profits, to arrive at an estimate for the full year. In this case it's easiest to rely on the house broker's forecast, updated today on Research Tree. This shows EBITDA reduced by 10%, and EPS by 20%, for the full year ending 10/2019.

The company likes to talk about EBITDA, but in my view that number is not reliable for valuation purposes, because the company looks set to capitalise costs of over £4m into intangibles (£2.2m in H1), which note 8 shows is mostly development costs - which in my view is ongoing payroll costs, which is part of running the business, so it cannot be ignored for valuation purposes. This is mitigated by a useful £832k tax credit last year.

Also, as it has material borrowings, we cannot ignore the interest charges either, another reason why EBITDA is not a good measure here.

There are lots of other things I don't like about these figures, so I'll keep this brief & move on;

Balance sheet - is too weak, making this share high risk, in my opinion.

Net debt - looks uncomfortably high to me, at £25.4m - bank facility expires in Feb 2020, so is classified as a current liability - which makes the current ratio look very bad. That won't be a problem if the bank facility is renewed, but it does reinforce the reality that this group is heavily dependent on the confidence of its lenders.

Going concern note - reinforces this point by emphasising that the group is reliant on renewal of its bank facilities, in 7 months' time.

Dividends - not being resumed at…

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Idox plc is a supplier of specialist information management solutions and services to the public sector and to regulated asset intensive industries around the world. The Company operates through five business segments: Public Sector Software (PSS), Engineering Information Management (EIM), Grants (GRS) and Compliance (COMP). PSS segment is an application provider to the United Kingdom local government for core functions relating to land, people and property, such as its planning systems and election management software. The EIM segment delivers engineering document management and control solutions to asset intensive industry sector. The GRS segment delivers funding solutions to private and third sector customers. The COMP segment provides compliance solutions to corporate, public and commercial customers. more »

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Tungsten Corporation plc is engaged in e-invoicing, purchase order services, analytics and financing business. The Company's segments include Tungsten Network, Tungsten Network Finance, Tungsten Bank and Corporate. Its Tungsten Network segment includes e-invoicing and spend analytics business of Tungsten Network. The Company's Tungsten Network Finance segment includes the supply chain finance business. Tungsten Network connects buyers to their suppliers, enabling tax-compliant electronic invoicing. Its software translates and validates each supplier invoice, and allows suppliers to check invoice status online. All the users ' invoices are digitally signed, encrypted and stored within the Tungsten Network image archive, where the user can access them anytime. Tungsten Bank provides specialist banking products and services. It focuses on providing invoice financing solutions to small and medium enterprises (SMEs) in the United Kingdom, the United States and Europe. more »

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Beeks Financial Cloud Group PLC is a United Kingdom-based provider of custom computer programming company. The Company is focused on providing niche cloud computing and connectivity services for automated trading in futures and forex financial products. The Company’s platform designed for latency sensitive automated trading environments and provides on demand low latency computing resources to its clients through its direct connectivity. The Company offers server infrastructure and connectivity to its clients which enables same day trading of forex and futures on financial exchanges and trading venues. The Company’s products include dedicated server, VPS, and Co-Location. more »

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

35 Comments on this Article show/hide all

davidjhill 23rd Jul 16 of 35

In reply to post #495816

£BKS share price moved down sharply the other week off the back of some PI selling when a blog mentioned concerns around hitting their numbers and lack of tier 1 new orders. Todays announcement does two things. 

(1) trading is in line so the expected strong H2 has materialised as expected (this is a fairly normal pattern with this business so nothing new). It also means ARR going in to next year is around £1.75m higher than actual 2019 revenues due to recurring nature of the business. Thus to hit next years numbers requires circa £3m of new business.

(2) Todays Tier 1 announcement reduces risk around this as it probably adds circa £1m of those revenues so even if the core business only generates 15-20% growth it should hit targets. Therefore, I now see upside risk to forecasts.

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JohnEustace 23rd Jul 17 of 35

In reply to post #495876

£ANCR went on my blacklist following the Ecupharma reverse takeover which was covered here in June 2017.

Also on a dedicated thread at

I was puzzled by your reference to their website because I remembered it being fairly clear. I see they in fact have two sites, a corporate group one that Stocko links to, and a more consumer facing one at

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jonesj 23rd Jul 18 of 35

In reply to post #495941

Thanks JohnEustace! I was looking at the corporate website. All that's missing is a big clear link from the ANCR corporate website to the consumer one, or perhaps a lack of curiosity & nous on my part ! A little more visibility on how they are evolving the product portfolio would help too.

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Julianh 23rd Jul 19 of 35

Good morning Paul
Lots of interesting announcements today though I am not sure if they are all in your areas of interest:
Beeks Financial Cloud (LON:BKS):
* they now have 3 tier 1 clients which should give them good reference clients to help them to add more
* winning new clients at the end of the year gives good committed revenues for next year
dotDigital (LON:DOTD)
* more steady growth
* GDPR does not seem to have caused them any problems
Franchise Brands (LON:FRAN)
* forecast beating H1 results
* I wish the names of their franchises were not so off-putting
* management have a good track record in building franchise businesses - if I am right they were the original founders / builders of Domino's Pizza (LON:DOM)
Fevertree Drinks (LON:FEVR):
* nothing much happening this year
* justification of their high price will depend on the success of their US and international expansions
Your thoughts on any / all of these would be much appreciated

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Trident 23rd Jul 20 of 35

Re Revolution Bars (LON:RBG)

I notice that unlike prior years there has been no Trading statement in June, prior to the releasing of preliminary results, usually in Sept., unless I have missed something?

They have stopped the dividend to allocate capital to refurbs of some of the bars, and to reducing the borrowings.

However, they said in March some other refurbs impacted on the results for December, when like-for-likes stats were down.

The silence on trading is a bit worrying, because if its good/OK, usually there is an impetus to tell the market. So, I am expecting some disappointment.

I am a holder.

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rmillaree 23rd Jul 21 of 35

In reply to post #495916

Norcros (LON:NXR)

I recently sold off, and am happy enough to have done so on this update, as I consider that revenue growth is weaker than usual and the zero lfl growth is also off

The way i look at at is that  while the pe is 6.5 the business doesn't need any growth to generate sufficient cash over the short/medium term so that shareholders should do well..

If you look at current years net profit 29 mill - that should be giving them £10 mill + warchest available to buy a new business (for cash if they wanted) - say buying at pe of 10 -  that's £1 mill extra profits going forward or a 3.3% increase in earnings they can expect from utilising that spare cash. So that is an added benefit of a low pe company with decent cashflow that they do have this added weapon at their disposal. the one issue at present is that as debt is quite high they may choose to repay debt rather than acquire added on business.

So i continue to hold in the hope that one day the market will agree with me that this company is worth more that the current shareprice gives it credit for. I would say the market deffo disagrees with my stance here as this share is pretty much eternally cheap as chips on pe.

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rmillaree 23rd Jul 22 of 35

In reply to post #496011

Revolution Bars (LON:RBG)
I guess that the norm is that they update in trading late july - this was the case in 2017 and 2016.
The june 2018 update i am presuming was a forced profit warning rather than the norm.

so i would be surprised if something is not scheduled to be released in the next 7-9 days - it should be easy enough to confirm with the company though.

i would say the silence should be good news in that they haven't had to warn again on profits as they are prone to do - unless they cobble together an excuse that the reasons are such that they are only finding out now.

One slight anomaly is that the forecasts for 19 and 20 have been reduced again in the last month according to stockopedia.
Is this just late feeding through of numbers from March or are the company slightly lowering expectations behind the scenes without advising the market explicitly that this is the case ? Note 0.9 mill reduction on 5.6p EPS expected previously is over 10% - so i would hope this is slow broker update based on what they said March rather than anything untoward.

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WDWombat 23rd Jul 23 of 35

Agree that DOTD should be covered here although this is, after all, just a detailed trading update. I mean between them and TUNG there is a gap as wide as the Cheddar Gorge. I no longer have either but wish I had held my DOTD.

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Gromley 23rd Jul 24 of 35

In reply to post #496036

Revolution Bars (LON:RBG)

One slight anomaly is that the forecasts for 19 and 20 have been reduced again in the last month according to stockopedia.
Is this just late feeding through of numbers from March or are the company slightly lowering expectations behind the scenes without advising the market explicitly that this is the case ?

If I am interpreting the Stocko data correctly then the consensus is made up from 5 analysts, so the markdown might just be an update from one of them?

There could be an element of "read-across" here from other results (both of pubcos and other related companies).

I note that £

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davidjhill 23rd Jul 25 of 35

£TRMR We had a lot of discussion on here about over last few months so I know there are several interested posters.

Whilst not a specific news item today I've noticed several integration announcements recently and the share price has had a bit of a relentless rise from the 75p nadir up to 170p+ . It appears as though the market is gradually coming to the conclusion that the business is not a fraud and therefore pretty cheap. New CEO seems to be doing a decent job with the market messaging and the share buy backs seem to be doing their job of mopping up any excess stock. Also feels a bit like the inevitable merger stock overhang has cleared and there are less stale bulls left of the two old entities hanging around looking for a reason to sell.

Appreciate this is a marmite stock - does anyone have any other views on reasons for the rise as wondering if I've missed something specific?

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mojomogoz 23rd Jul 26 of 35

Hello. I don't usually make analysis requests...but how about GetBusy (LON:GETB) ?

Its been covered a bit in SCVR in the past. I did some cursory research into company when they announced about month ago that they were tidying up their reporting format into product verticals rather than by country. Yesterday I decided to look again ahead of interims today and took a small position. IMO its got too much to prove to be a big position but here's why I thought it probably mispriced and worth a bit of risk:

1) It has been successfully growing revenue and margin
2) It was spun out of a successful business in Australia (Reckon Ltd - accounting software) owned by GetBusy's CEO's father - who has a 20% stake in GETB
3) CEO is relatively young (31?) and unproven although has had startup experience so has some wear and some fatherly mentoring. Not necessarily all positive but potentially positive
4) After listing they seem to have gotten themselves an experienced FD sort as CFO who has tidied up reporting
5) I tendency to expense R&D rather than capitalise
6) Most established product 'Virtual Cabinet' is most of revenue (c. £8m pa I think) and cash flow positive.
7) Second earning product is called 'Smart Vault' and was acquired just before IPO. Its been growing at 30-40% rate I think and is approaching cash flow breakeven. I think it had a bit of sketchy rep with customers sometimes in the past and GETB have been repointing the product since taking over with what seems like improvement in perf
8) 3rd product is live beta. They have given out free and don't charge. Its called GetBusy and is B2B communication and productivity software. They admit they need to work out how to commercialise but the live free beta with their installed 65k+ business and 400k ish global users is the right move. Once they find way to fee for it its pure $ to bottom line. There's high but unknown optionality in this
9) on 8, they've put in about £1m pa to develop the beta. If they hadn't they would be cash flow positive today
10) Recurring revenue is very high - >90% I think.
11) Once you start using their product there is a very high inertia re moving. Their client loss rate is less than 1% pa
12) The rate of earnings growth as revenue surpass costs base should be high

1) Some very heavy options incentives of about 10m shares (if I recall correctly) The strike is around 50-100p range so distance to travel. From my cursory reading I recall 2m to CEO, 1m ish to CFO so I assume quite a lot going to the broader team (in true tech start-up style)
2) Could be more economic cyclicality than think as little businesses go under or cut costs (though inexpensive so not likely first)
3) Competition...but they are growing fairly rapidly suggesting that that product has desirability and perhaps that users are good promoters for them in business networks

Its a small position for me relative to higher conviction and stuff that can be analysed with more clarity...but I think quite high upside potential and perhaps quite long duration and durable

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mojomogoz 23rd Jul 27 of 35

In reply to post #496116

Shhhhh! I'd I've kept quiet until above 250p at least ;) ...who knows what randomness is afoot and with a share price that sketchy and a company so disparaged (much of it correct from rearview mirror perspective) where the SP might end up

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Paul Scott 23rd Jul 28 of 35

In reply to post #496011

Hi Trident,

Re Revolution Bars (LON:RBG) (in which I have a long position) - we'll have to see what the next update says.

Last year they warned on profits on 14 June 2018, just before the year end of 30 June 2018.

The way I see it, the fact that we have not had a profit warning this year, suggests it should have traded in line with expectations - otherwise they would have had to inform the market. Also, they're up against soft comparatives for last year. Therefore, I'm quietly hopeful that the next update might be better than the bombed-out share price suggests.

Interim results to 29 Dec 2018 were not good, but it's still generating a ton of EBITDA - which should enable it to self-fund refurbishment of the tatty sites which are pulling down group performance. Other issues, mainly a loss of key area managers, who took their best site managers with them, should be fixable, with no distractions from new site openings.

The market cap looks amazingly cheap to me, but that's because there's little liquidity, so drip drip selling from stale bulls results in long periods of the share price being bombed out. We've seen this before, then it shot up when Stonegate bid for it at 203p. I reckon, at the current valuation of c.65p, it's only a matter of time before another bidder turns up. We saw a recent (much larger) deal with EI (LON:EIG) at a reasonable premium, so there are bidders out there, despite macro uncertainty.

If you compare the valuation of RBG with Loungers (LON:LGRS) it's unbelievably cheap - especially as RBG has very little debt compared with LGRS. And the EBITDA performance isn't actually that different, although there is a widespread view the LGRS management are very good, and newish RBG management yet to prove themselves, but seem determined to fix the problems when I last saw them.

Anyway, let's see what happens!

Best wishes, Paul.

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JohnEustace 23rd Jul 29 of 35

In reply to post #496116

£TRMR is up over 20% today on high volume.

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Trident 23rd Jul 30 of 35

In reply to post #496171

Hi Paul

Thanks for your reading of the Revolution Bars (LON:RBG) situation

Probably, I am just preparing myself for disappointment. I did buy some a little while back to average down a little but then the price dropped again. So I have the occasional outbreak of bullishness which has not been rewarded thus far, but fingers crossed.

Just on another subject I note that UP Global Sourcing Holdings (LON:UPGS) have been buying quite a lot of shares for their Employee Share Trust.

This is a more honourable, and equitable strategy for supporting option awards, than just issuing new dilutive shares. It might also suggest the Directors see the stock as under priced and are taking advantage of an opportunity

However, being of the Eeyore tendency, I can also see this as a means of playing Keepy Uppy with the share price for short term benefit in relatively low volume markets, and also using up quite a bit of working cash.

Of course it gives a nice dividend yield, and has a trading statement that suggests it will exceed market expectations - so there is no pleasing some people like me.

However, this is one of my few stock choices where I have averaged down quite a bit, that has paid off - for once!

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Gromley 23rd Jul 31 of 35

Very interesting goings on today with Scapa (LON:SCPA) on their AGM day.

A quite positive AGM statement released early doors but which made no mention of the lost Convatec business nor the upcoming litigation.

There was a modest rise this morning on the back of this.

The AGM was due to kick off at 10:30am and the results of AGM statement was issued after market close this evening.

However at around 2:45pm the blue touch paper was lit and the shares rocketed to finish up 20%.

I wonder what time the AGM and/or any post AGM meetings actually finished?

Was anyone here in attendance?

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Camtab 23rd Jul 32 of 35

I suspect the Tier 1 non bank addition is Fidelity. If so it would be interesting to know if it is their international or US division. Could leave room for upscale although Fidelity are primarily an equities house which BKS don't do.

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mojomogoz 23rd Jul 33 of 35

In reply to post #496241

...Nearly 10% of the market in Tremor International (LON:TRMR) traded today...something surely going down and RNS reveal coming...

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davidjhill 24th Jul 34 of 35

In reply to post #496341

(LON:TRMR) we spoke too soon............

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mojomogoz 24th Jul 35 of 35

In reply to post #496681

It's interesting on Tremor International (LON:TRMR) - I've no idea what moved it up over 2 prior days and down today so much. Volume yesterday for >20% move up was 10m whereas today -12.5% is on about 600k which is about half average volume. Yesterday there seemed to be a very big crowd of mainly buyers. Today there as a fairly small crowd of mainly sellers. Beyond those banal observations there's a lot to fill in....

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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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