Small Cap Value Report (Wed 19 Jul 2017) - LRM, HOTC, EYE

Wednesday, Jul 19 2017 by

Good morning everyone! It's Paul here.

Many thanks to Graham for adding some extra sections to yesterday's report, as I had a busy afternoon dealing with other stuff. I think we'll work that way in future - as readers seem to prefer having all our sections in the main article. My experiment with posting additional sections in the comments area didn't seem to go down well, and I understand why - as such comments could be easily missed.

On to today's news.

Lombard Risk Management (LON:LRM)

Share price: 10.85p (down 16.5% today)
No. shares: 400.6m
Market cap: £43.5m

AGM Statement - this software company has a 31 Mar 2018 year end. It is a developer of software for banks, concerning e.g. collateral management & regulatory reporting.

There's very little information about trading in today's update. This bit is the closest it gets to being a trading update;

The Company continues to see a positive market for its products with the landscape largely unchanged since we announced our 2017 full year results in May.

That doesn't sound particularly good to me.

Also this bit is somewhat worrying;

"We have historically reported full year revenues that are weighted to the second half of the year and we expect the year to 31 March 2018 to be no different.

I think the market has taken this as a veiled H1 profit warning, which is probably sensible, given this company's poor track record.

The next bit says that they have a positive pipeline, but nothing positive is said about actual performance. That again suggests to me that things possibly aren't going particularly well:

The Board is encouraged by the pipeline of new business being pursued both through the Company's direct sales force and through its relationships with its channel partners.

Lombard Risk continues to invest in its development centre in Birmingham, which will provide the Company with both time to market and cost advantages. The Board is satisfied with the progress of this important initiative and continues to look to the future with confidence."

This company is always relentlessly confident, but that means nothing in terms of performance, which has been poor for several years now.

Note that nothing is said about performance compared with market expectations. That, combined with the H2 weighting…

Unlock this article instantly by logging into your account

Don’t have an account? Register for free and we’ll get out your way


As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.

Do you like this Post?
49 thumbs up
0 thumbs down
Share this post with friends

Lombard Risk Management plc is a holding company. The Company's principal activities include provision of trading, valuation and risk management systems, regulatory and transaction reporting systems and compliance systems to the financial markets, including banks, fund administrators, investment firms, asset managers, energy companies and other firms operating in financial markets and the financial industry. It focuses on collateral management, regulatory and compliance. The Company operates in two segments: Regulatory Compliance software, which is for regulatory, anti-money laundering and compliance systems to financial markets, and Risk Management and Trading software, which provides trading, valuation and risk management systems to the financial markets. The Company's software products include COLLINE, OBERON, REPORTER, REG-Reporter, LISA and ComplianceASSESSOR. It has operations in the United Kingdom, Americas, Asia Pacific, Rest of Europe, Middle East and Africa. more »

LSE Price
Mkt Cap (£m)
P/E (fwd)
Yield (fwd)

Hotel Chocolat Group plc is a chocolate company. The Company is engaged in manufacturing and retailing of chocolate in the United Kingdom and overseas. The Company operates in three areas: the United Kingdom, Europe and Rest of World. The Company offers chocolates under the brand, Hotel Chocolat. The Company sells its chocolate direct to customers though subscription, online and its approximately 83 stores. The Company's product ranges include self purchase, gift and occasion, rare and vintage, and other. Its product types include boxed chocolates, luxury boxed chocolates slabs and batons, enrobed fruit and nuts, chocolate hampers, ribbon bags, wine and spirits, hot chocolate and cocoa cuisine. Its chocolate types include dark, milk, white, bean to bar, boozy, caramel, cocoa gin, coffee, fruity, marzipan, mint, nut, patisserie, praline and truffles. The Company owns a cocoa plantation in Saint Lucia called the Rabot Estate. more »

LSE Price
Mkt Cap (£m)
P/E (fwd)
Yield (fwd)

Eagle Eye Solutions Group plc is a software as a solution (SaaS) technology company. The Company is engaged in the marketing, validation and redemption of digital promotions in real-time for the grocery, retail and hospitality industries. The Company's software platform, Eagle Eye AIR, integrates with all existing point of sale (POS) systems and creates digital offers, rewards and vouchers then delivers them to customers by e-mail, text or through a loyalty application for instant redemption. Eagle Eye AIR enables brands and merchants to set up targeted campaigns, choosing various media channels to reach specific demographics. Eagle Eye AIR captures real-time data on consumer activity and campaign success. Eagle Eye Promote is a rules-based platform for brands and retailers, which creates, builds and manages their promotional campaigns. Eagle Eye Gift allows tracking of gift vouchers, including redemption data. Eagle Eye Reward supports and enables the digitization of loyalty schemes. more »

LSE Price
Mkt Cap (£m)
P/E (fwd)
Yield (fwd)

  Is Lombard Risk Management fundamentally strong or weak? Find out More »

30 Comments on this Article show/hide all

andrea34l 19th Jul 11 of 30

As you ask Paul, I have tried HOTC, a couple of times... via presents to me. Now I am generally regarded as a bit of a chocoholic with a taste for the finer side of chocolate... and in my opinion I don't think they are worth the money, especially considering they are essentially a chain - for a smaller treat one is paying £1 per chocolate which I think is ridiculous. Some of the flavours are lovely but some are just a bit odd, and some chocolates are just too intense to be enjoyable. I have a place where I work (in Dublin) called Leonidas and they make scrummy hand-made Belgian chocs which are cheaper and much nicer.

| Link | Share
Paul Scott 19th Jul 12 of 30

In reply to Nick Ray, post #7

Hi Nick Ray,

Ah yes, you're right. Sorry, the green line is the 50-day MA, and the red line is the 200-day MA. I'll fix this error in the article now.

Serves me right for straying into charting, I was bound to get it wrong!!

Thanks for pointing out this error.

Regards, Paul.

| Link | Share
SmallCappy 19th Jul 13 of 30

In reply to otemple, post #9

Like you I am a long term holder of CLIG. Contrast the transparency of the TU from CLIG with its real numbers and the weasel words of most TU's 'in line with management expectations'. Unless management has expressly set out what their expectations are (which they never do) this is just meaningless waffle. I think Paul has commented on this before but for me this is one of the biggest problems for investors. Quoted companies really need to up their game on transparency.

We need to ban weasel words!

| Link | Share | 1 reply
CliveBorg 19th Jul 14 of 30

In reply to SmallCappy, post #13

Stoatily agree.

| Link | Share
Francis Dwan 19th Jul 15 of 30

Hi Paul hope you are well, just wondering if you would cover the Mi-Pay (LON:MPAY) results that are out Friday. Company should (finally) be moving into profitability, with some big clients like Tesco mobile etc. on board. Update might be of interest

| Link | Share | 1 reply
ricky65 19th Jul 16 of 30

In reply to doug2500, post #8

I don't know of any reason for the rise in Focusrite (LON:TUNE) today. It's been in an uptrend since the well received results in May. I think it's called positive post earnings drift.

| Link | Share
herbie47 19th Jul 17 of 30

I read it's something to do with Intel Thunderbolt connection that may replace usb.

| Link | Share
Carey Blunt 19th Jul 18 of 30

In reply to Francis Dwan, post #15

Are you sure you want Paul to comment? It's listed as highly speculative micro cap sucker stock with a stock rank of 10!
Do you think that this is about to deliver the jam?

| Link | Share | 2 replies
bestace 19th Jul 19 of 30

In reply to Nick Ray, post #6

That's interesting, thanks for sharing.

To me that illustrates the need to look past the headline StockRank to really understand a company's quality, which obviously has implications if using the StockRanks as part of a screening process.

I'd suggest that using metrics based on gross profit is probably misleading when the top of Lombard's income statement looks like this:


Likewise the Stockopedia algorithms are assuming a 15% long term ROCE and 8.8% margins when the direction of travel for LRM looks like this:

| Link | Share
ricky65 19th Jul 20 of 30

Paul, I use the 20, 50, 100, 150 and 200 MAs and sometimes I can get muddled between them!

I don't think Hotel Chocolat (LON:HOTC) qualifies as a Minervini stock at the moment as, being below the 50 MA, it fails to meet Minervini's Trend Template criteria. I've got a feeling he wouldn't buy it unless it broke out to an all time high on high volume.

| Link | Share | 1 reply
Paul Scott 19th Jul 21 of 30

In reply to ricky65, post #20

Hi Ricky65,

I wasn't suggesting that Minervini/growth investors would necessarily buy Hotel Chocolat (LON:HOTC) now. My point was rather that they might have previously bought the stock when it was in an up-trend, and might now be selling. So that selling could become a headwind, making the stock perhaps unlikely to make new highs?

Regards, Paul.

| Link | Share
MSR Bruce 19th Jul 22 of 30

I agree that the Hotel Chocolat product is not particularly good!

| Link | Share
Fangorn 20th Jul 23 of 30

Hotel Chocolat is superb - their array of offerings extensive. There's also a decent Dark Chocolate option which is appealing for an ex Bournville dark eater.Wont touch the Cadbury brand anymore.

Yes they're a bit on the pricey side but not if one considers chocolate to be a treat!

Subscribe to a Quarterly box myself - and the odd Easter/Crimbo additional box.

Very satisfied.

| Link | Share
Francis Dwan 20th Jul 24 of 30

In reply to Carey Blunt, post #18

Expecting the company's maiden profit in Friday's results. Client list is A1, with names like Amazon, Paypal, Sainsburys, and Tesco. Operating losses should have been largely reduced, as company achieves more and more scale to their operations. SE Asia area of large potential growth, underpinned by solid earnings growth in Europe. However we shall see, I'm often wrong more than I am right

| Link | Share | 1 reply
Francis Dwan 20th Jul 25 of 30

In reply to Carey Blunt, post #18

Sorry I meant to thumbs up but impossible to change

| Link | Share
herbie47 20th Jul 26 of 30

In reply to Francis Dwan, post #24

I note the share price is down heavily today, maybe there is some leak about results. The spread is very wide.

| Link | Share
Paul Scott 23rd Jul 27 of 30

I spotted a Hotel Chocolat in Glasgow today (on a flying visit). I bought 3 small packs of different chocolates - 6 squares of chocolate in each pack. Cost £9.45.

Opinion of the 3 people (incl. me) who ate them - OK, nothing special. Expensive.

The shop was very nicely presented. Overall, I wonder if this new brand might have some appeal to begin with, but might wane over time. I just don't think the product is good enough to justify such high pricing. So I won't be buying any shares, as it looks an expensive stock, for only moderate earnings growth.

Regards, Paul.

| Link | Share
vik2001 24th Jul 28 of 30

im not tight but I wouldn't pay £10 for choclates unless I knew a lady was going to return the favour lol.
give me a cadburys wispa anytime ;)

| Link | Share
ratioinvestor 27th Sep 29 of 30

Paul - I am not sure with the assessment that Hotel Chocolat's products are expensive. Price is relative to quality and the product you are buying. Hotel Chocolat has a very clear brand for "More coca, less sugar." Other chocolate makers use less expensive sugar and occasionally substitute coca butter for a less expensive alternative such as palm oil. Coca is expensive so chocolate with a higher content will cost more.

Much of the chocolate on the market is therefore low quality junk. For people who are into chocolate it matters if you are buying a bar full of cheap sugar or the product you actually want. There is a health shift away from sugar while coca is considered to be a healthy product. Consumers choose brands according to whether they trust them and Hotel Chocolat is building up a brand focused on quality.

A mistake I have made is assuming that all consumers are like me. So I may not invest in say Just Eat as I don't like takeaways. I think with Hotel Chocolat it is easy to assume that all consumers won't pay more for higher quality chocolate if you wouldn't yourself. However, some consumers will pay more for quality. Chocolate is a treat and as such price is less important than quality. Chocolate is also often bought as a present or to share with someone. When it is bought as a present or to share there is a tendency to go for higher priced and more premium brands.  Try giving a date, a friend or family members a cheap box of own brand supermarket product as a present.

On the point that the appeal of the brand may fade over time. I am not sure as the trend is actually towards more authentic, quality and artisan products (premiumization and authenticity). This is where consumers are willing to spend and it is hitting sales at the global consumer staple giants. I don't think this trend will reverse.

In Edinburgh there is a Thortons and a Hotel Chocolat right next to each other. They both perform well. There is a market for both. Lastly, I am not sure of your assessment of only moderate earnings growth. What is the long-term potential for this business? Can it be a success in Europe and elsewhere? Can it be a global brand?  As far as I can see Hotel Chocolat is well placed for the current global consumer trends.

| Link | Share
ratioinvestor 27th Sep 30 of 30

From HOTC's final results highlighting why the are more expensive. Some consumers may not recognize the taste difference. It is clear that HOTC's first priority is quality rather than price. This is a strategy that tends to win in the long-term and I think consumers are increasingly becoming more discerning. It is easy to look at this as a marketing gimmick and a way of shifting high priced chocolate. However, if you try cheap, sugar filled chocolate bars they are pretty disgusting by comparison. From HOTC's recent final results:

"Consumers increasingly want uncompromisingly delicious and hedonistic chocolate that's also made with responsible amounts of sugar. Hotel Chocolat's 13-year track record of "more cocoa, less sugar" is applied to every grade of chocolate, from our whites, through milks and darks. This makes us virtually unique amongst premium chocolate brands. Flip over and read the ingredients of other milk and white brands and you will find it quite revealing! Sugar will most often be the number one ingredient even with premium pricing. In our view, if cocoa isn't the number one ingredient, it really should not be called chocolate. All our chocolate grades meet this 'cocoa first' requirement, even our whites and milks. When you consider that sugar is about 20 times cheaper than cocoa, the reason why other brands take a different route becomes clear."

| Link | Share

What's your view on this article? Log In to Comment Now

You can track all @StockoChat comments via Twitter

 Are Lombard Risk Management's fundamentals sound as an investment? Find out More »

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 »


Stock Picking Tutorial Centre

Let’s get you setup so you get the most out of our service
Done, Let's add some stocks
Brilliant - You've created a folio! Now let's add some stocks to it.

  • Apple (AAPL)

  • Shell (RDSA)

  • Twitter (TWTR)

  • Volkswagon AG (VOK)

  • McDonalds (MCD)

  • Vodafone (VOD)

  • Barratt Homes (BDEV)

  • Microsoft (MSFT)

  • Tesco (TSCO)
Save and show me my analysis