Small Cap Value Report (Tues 27 Oct 2020) - BMY, AA., HTG, QUIZ, RBG

27th Oct '20 by Paul Scott

80 comments 11978 reads

Good morning, it's Paul here with the SCVR for Tuesday.

Reader comments - can I echo a repeated request here from other readers. If you're going to comment on any company, please include the ticker, or company name, in every post. Otherwise some readers won't know which company you're talking about, hence your comment is pointless to many readers. It depends which version of the site & comments layout people are using.

I've started a bit late today, so am aiming for a 3pm finish time. The first couple of sections should be up before midday. Update at 16:51 - today's report is now finished.

Agenda - this is what has caught my eye today, and taking into account reader requests too (which I try to do where time permits);

Bloomsbury Publishing (LON:BMY) - Interim results

Aa (LON:AA.) - Extension of deadline re takeover bid(s)

Hunting (LON:HTG) - Q3 Trading update

Quiz (LON:QUIZ) - (I hold) - Results FY 03/2020

Revolution Bars (LON:RBG) - Launch of CVA in subsidiary entity

Bloomsbury Publishing (LON:BMY)

Share price: 243.5p (up 16% at 11:10)
No. shares: 84.1m
Market cap: £204.8m

Unaudited Interim Results

As usual, my first step when looking at all companies, is to review my previous notes. In this case, I reported here on 21 July 2020, when BMY issued a positive AGM trading update. This said Mar-June trading had been strong, with sales up 18%, ahead of expectations. Liquidity was strong. It reminded us that trading is H2 weighted, and the outlook was uncertain.

Moving on to today’s interim results;

Bloomsbury, the leading independent publisher, today announces unaudited results for the six months ended 31 August 2020.

It looks good, here is the CEO’s summary;

"Bloomsbury experienced excellent trading in the first half with year-on-year profit growth of 60% to £4.0 million. This has delivered our highest first half earnings since 2008 and exceeded the Board's expectations.

Obviously this is good, but we should bear in mind that the full year needs to be a lot higher than H1, to meet expectations. For context, full year adj PBT was £15.7m last year, so a £4.0m profit in H1 this year is still quite modest. Hence I’m more interested in the full year outlook comments.

We…

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Silver Moon

27th Oct '20

It just worked for me kendal, arrows down opens the chart? - Silver

abtan

Some scrappy notes below on Bloomsbury Publishing (LON:BMY) for anyone interested (apologies for the Adrian Mole-esque digital scribbles).

FWIW, I like the cash generation and will hold for now, but I was put off by the underlying weakness in the last 2 months of the period (which the company did NOT highlight) - it makes we wary that this negative trend will continue for the rest of the year:

Results were okay, but there was a BIG slowdown over the summer.

Print Revenues actually decreased YOY in P5-P6:

Academic GM actually decreased. This is strange given acceleration in digital sales. Implies digital margins are actually lower than print - this is implied in commentary, so the company isn't lying to us, assumed the positive side is that revenues are just more predictable due to the Saas nature of this stream:

jonesj

Ref: QUIZ (LON:QUIZ)

If a retailer negotiates a rent based on turnover, how does the landlord verify the turnover so that the correct rent can be charged ?
The accounts are presumably only required to show the turnover for the entire company, including all stores, on line etc, so this would be of little use.

barnetpeter

Of course.....at some stage it will be right to buy trackers or large cap investment trusts. Buying in March this year was the right thing to do and we might go close to those lows in the months ahead.

"More than 95 per cent of London businesses have cancelled bookings for traditional office parties this Christmas".....this is a key time for a lot of small business and I doubt many will survive. But others will take their place by next year.

Paul Scott

There's a requirement in the lease to produce an audited statement annually for the landlord, to verify revenues. That was about 20 years ago, when I managed about 50 turnover rent sites. These days I imagine landlords might have software to link into the EPoS system - do any readers have any more up-to-date experience of this?

SundayTrader

re Accsys Technologies (LON:AXS), I suspect read across from good news coming out of suppliers into the home maintenance/improvement market. Very thin market in my experience.

JohnEustace

An extra issue now is how to account for online sales - how much do they benefit from the store presence, what about click and collect from store, returns via store etc.

Phuntt

It’s a device issue for me - works about half the time on my iPad (today list isn’t visible there), always works on my PC (today’s list is visible there)

Chriskay

GibboP

Somebody the other day was aking about finding risers and fallers of the day... I just came across this Google Sheet to the top risers + other useful variations on the same theme:

https://docs.google.com/spreadsheets/d/e/2PACX-1vR8x-34i2j-974-ughIQB8x3xyv2a0DdWUFyfQKbyZQIgUcP8rIpnWdDwt3IHgE5rRiu_pglkNKGCrn/pubhtml#

Boon

The Quiz (LON:QUIZ) update today was not very helpful IMO!

What's the latest month's YoY comparison? What is the current cash burn? What about scenarios (low, mid, high) for the next few months in terms of cash?

The fact that there was no mention of Positive monthly EBITDA, positive cash flow, positive any metric in the recent month(s) can only mean they're still heavily cash burning.

They do state current net cash of £4m+ but this could be from stretching creditors, definitely stretching VAT/HMRC payments, etc that is all going to come home to roost in the next few months. Therefore I see the £3m+ banking facility as not enough, as working capital will be required to build up stock levels again, through own stores and franchises.

I agree that the current valuation is cheap vs the brand equity, current net cash. But can Quiz ever recover? It wasn't a strong brand to begin with. Their existing customers - having spent 6-12 months not buying any dresses/partywear from them - will they go back to Quiz, or be tempted to try other brands?

alpha2

As far as RBG is concerned I think unless the government has the courage to admit their sunk cost fallacy issues they will continue to try and restrict the sector. I found this video interviewing Nick Hudson from Pandata19 compelling https://pandata19.org/coronavi...

The government has to return agency to the hospitality and retail sector and admit they got it wrong.

Revolution Bars (LON:RBG) (I hold)

Does anyone know:

a) why 4 more bars would be opened yesterday (why so late and with all the new lockdowns?) and,

b) whether the openings (yesterday) might have been timed with today's announcement? If yes, would there be any specific rationale for this?

Announcement of 4 more openings can be found here:

https://twitter.com/Revolution...

I'm pretty sure a) is a question make for all of us, but maybe someone has insights into b) ?

Cheers

cholertonandrew

Thanks Paul, another brilliant report. Regards, Andrew

rmillaree

Revolution Bars (LON:RBG)
I'm pretty sure a) is a question make for all of us, but maybe someone has insights into b) ?

Its tricky to be sure but it kind of makes sense that it may of partly been a ploy to get better rent discounts or it wasn’t worth the COVID related kit out costs if there was doubt that they may close outlets so now deal is done time to ge5 up and running.
iI would Guess the wind down of the furlough may also have something to do with it if they now have to partly fund wages might as well make em work.Not sure if they need to be open to get the new local council assistance for tier 2+ sites and Finally I would also guess that sites may materially dilapidate over the winter if left closed and are cold and damp. So plenty of reasons to get back up and running meethinks.

Finally I would also guess that sites may materially dilapidate over the winter if left closed and are cold and damp.

The longer a bar remains closed the higher the reopening costs are so there is always an imperative to get them running again. Mainly the costs is in machinery breakdown (ventilation systems, refrigeration etc) but also stuff you don’t think about - for example, we had to do a full legionella work up (which was expensive) after the last lockdown. I heard about a competitor who had a whole rat infestation, which cost thousands...

Nick Hudson did a brilliant interview on “state of the market” last week - definitely worth listening to

Some fair points there, I agree Quiz (LON:QUIZ) are not being fully transparent about current trading.

As regards inventories, they're already trading, so they have inventories, and bought all the stock in the pre-pack. I reckon the stores will need about £30k at cost inventories. So 60 stores, that's only about £1.8m in inventories, plus some more for the concessions (less, about £5-10k per site), and some Head Office stock for online sales. Therefore I estimate the (now smaller) business could probably run on about £4-5m inventories (it had £9.6m at end March, before the restructuring).

Backed-up creditors? I imagine you're right on that point, but the company isn't telling us if, or how much.

Overall, I think you're right, we're only being given incomplete information. I think the cash headroom is probably enough though, including the bank facility. But until we get interim results, we won't know for sure.

Regards, Paul.

Dojosan

6th Nov '20

For those exploring bottomfishing with Hunting (LON:HTG) - the company is heavily reliant on the US O and G industry. Now with blue wave no more - o and g industry can sigh with relief. Also, Hunting (LON:HTG) has extended life once US o and g industry picks up.

Gromley

Not really sure how far it affects Hunting (LON:HTG) , but I think you'll find that the blue wave was in the post.

Looks like there is even a chance that the Democrats get both houses Hasn't happened for a while and I'm not where that breaks if the president has both houses. Despite all of the rhetoric, if that does transpire we'll be glad that Biden is a moderate.

Small Cap Value Report (Tues 27 Oct 2020) - BMY, AA., HTG, QUIZ, RBG

Bloomsbury Publishing (LON:BMY)

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Paul Scott

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