Small Cap Value Report (Wed 25 July 2018) - WGB, QTX, JOUL, BUR, NXR, APC | Graham Neary

25th Jul '18 by Graham Neary

37 comments 12012 reads

Good morning!

Today we have interesting news from:

Quartix Holdings (LON:QTX) - interim results
Joules (LON:JOUL) - annual results
Burford Capital (LON:BUR) - interim results

We have in-line-with-expectations updates from STM (LON:STM), Empresaria (LON:EMR), James Halstead (LON:JHD) and Norcros (LON:NXR) (which I will discuss further below).

Wealth manager Brewin Dolphin Holdings (LON:BRW) issued an update which did not specify performance relative to expectations but looks strong.

Walker Greenbank (LON:WGB)

Share price: 75.5p (-8.5%)
No. of shares: 71 million
Market cap: £54 million

Trading Update

I'm detecting a lot of frustration from shareholders that the company saw fit to release this announcement at 16:27 yesterday afternoon, creating a bit of an intraday mess as far as the share price is concerned.

Walker Greenbank PLC (AIM: WGB), the luxury interior furnishings group, announces the following trading update in respect of the financial year ending 31 January 2019.

Paul has covered this company several times before (see the archives).

EPS expectations have been trending lower:

Yesterday, we learned the Board had materially revised down expectations for licensing income in the current year, after gaining "new information" on the potential profit from a recently signed licensing agreement.

Separately to this, ongoing trading has deteriorated, with orders below expectations.

Adjusted PBT will therefore be materially short of expectations.

At least we are given a new range to expect: adjusted PBT is likely to be £9.5 million - £10 million. It's very good to include this range in the RNS.

Anyway, the new estimate is not so terrible in comparison to last year's adjusted PBT of £12.5 million (2018), or the previous year's £10.4 million (2017).

And the financial adjustments the company makes don't look overly aggressive to me. Statutory PBT (what I call the "actual" PBT!) was £12.8 million (2018) and £7 million (2017).

So on the face of it, I don't see why the share price is down by another third after…

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MrContrarian

25th Jul '18

My morning smallcap tweet:

APC Technology (LON:APC), Earthport (LON:EPO), Vertu Motors (LON:VTU), Tern (LON:TERN)

APC Technology (APC) placing at 6.75p (nil discount) to fund a paper and cash acquisition.
Earthport (EPO) FY trading. Rev up 5%. Adjusted EBITDA loss increased by ~£1.9m to £4.8m but is below that previously expected.. "A challenging year for Earthport, with delays in implementation of client contracts and a change at one of the Group's leading e-commerce clients announced in December 2017." Increased loss due to cost of "delivering improvements to the Group's cost base and operational efficiency." Holders will be almost delighted.
Vertu Motors (VTU) AGM stmt. First 4 months in line. Interesting comment "expected, we are now experiencing longer new vehicle lead times from some Manufacturers, resulting in short term new vehicle supply volatility, as they manage the changes required ahead of the introduction of the Worldwide Harmonised Light Vehicle Test Procedure [new fuel consumption and emissions testing rules] on 1 September 2018. There is the potential for these supply constraints to extend from quarter 3 into quarter 4 of the calendar year, as Manufacturers balance supply, production and the availability of testing capacity on either side of the implementation of the new testing regime." I hold.
Tern (TERN) Placing at 26p, a 21% disc.

Lloyd Garvey

Norcros (LON:NXR) trading update. In line with expectations

Norcros Plc - Group's Overall Trading For Q1 Was In Line With Board's Expectations

Norcros Plc - Group Revenue For 13 Week Period Was 15.5% Higher On A Reported Basis Compared To Same Period Last Year

Norcros Plc - 13-week On A Like-for-like Basis Group Revenue Was 0.9% Higher Than Previous Year...

Snoo

Walker Greenbank please if you have time. RNS put out a few minutes before the market close, very sneaky.

I almost bought here last month on the back of the last statement so I would think there would be a few very disappointed holders here.

runthejoules

Morning Graham et al, early votes for WANdisco (LON:WAND) (it's in blockchain, I don't understand it), Burford Capital (LON:BUR) (maybe too big tho) & Eagle Eye Solutions (LON:EYE) please, cheers!

Fishcake

Staffline (LON:STAF) interims today, Statutory results look great, underlying less so. Debt up due to acquisitions?

"Positive outlook for the remainder of 2018 and for 2019 as acquisitions are fully integrated together with continued organic growth in the Recruitment division. With the business mix increasingly weighted towards the more seasonal recruitment business, the phasing of profits will be second half weighted. PeoplePlus results will be affected by the transition from an Employability to a Skills and Training organisation."

JohnWigg

Muckshifting company Van Elle Holdings (LON:VANL) FY results. Increased revenue (10.4%) but OpPft flat and eps down by 6.1% to 9.2p giving PER of about 9x. (Underlying eps 10.6p.)
Company has had issues - boardroom coup attempt (failed) and contracts with Carillion. Pretty decent all considered, I think and outlook confident.
I don't hold, but would welcome comment.

jonno

Morning Graham

Norcros (LON:NXR) AND Walker Greenbank (LON:WGB) time permitting please. I have been a long time holder of Norcros (LON:NXR) and management have done a creditable job of growing the company while dealing with the inherited debt and pension deficit and rewarding shareholders with a good dividend stream. Unfortunately I bought Walker Greenbank (LON:WGB) recently on the basis of what appeared to be an improved AGM statement and inherent brand value!! Given the AGM was last month this reflects very poorly on the quality of the management.

fwyburd

Hi Graham, another request for Walker Greenbank (LON:WGB) please. I went bottom fishing a few weeks ago and took a small position and so was very disappointed with yesterday's late RNS. What's extraordinary is they seem able to revise their Jan 2019 end year forecast with a strong degree of certainty (£9.5-10m) yet put out this profit warning 1 month after their AGM statement. Not sure what to make of it but hope you can decipher.
cheers
Francis

Zipmanpeter

Walker Greenbank (LON:WGB)

Major slide in share price since trading update - from >200p in Sept 17 to 110p a few days ago to 67p today. Already stated trend of -6% UK/-3.8% export revenue and July was apparently very bad. Confidence in key Autumn period much reduced and H2 usually (and expected to be this year) stronger.

But still profitable: "The Board now anticipates that adjusted profit before tax for the year ending 31 January 2019 is likely to be in the range of £9.5 million - £10.0 million".

Already appeared very cheap on most metrics. Great QV scores but now very bad on momentum. Now good opportunity to be buying in for the long term (2-3 years) if you believe that there will be a continuing world market for premium wallpaper and fabrics? Released news does not seem to justify the scale of price dip.

Despite Stockopedia warning on buying on profit warnings, I have bought a few today and will buy more if no new news emerges. I still think a divi will be paid and I think sales will recover.

WarrantStar

Good morning Graham.
Alliance Pharma (LON:APH) Please comment on today's trading update and the associated share price fall.
Thanks

Graham Neary

Thanks for the early requests. I'll see what I can do re: Norcros (LON:NXR) and Walker Greenbank (LON:WGB). The others may be more difficult for me. G

bsharman

Walker Greenbank (LON:WGB) & Van Elle Holdings (LON:VANL) - would good to hear your views on both of these.

I picked up Walker Greenbank (LON:WGB) after their AGM statement. Releasing a trading statement (profit warning) at 16:27 is unforgivable - can someone tell me why this was done or why they were advised to do this? Surely the items detailed in the statement would have been known about for days or weeks, so why not release it at 7am the next morning, when the market is closed?

The management should be put under pressure to answer and have lost their credibility because of this terrible communication.

tic_tac_toe

^ Agree with all of this. Mgmt credibility is shot to pieces. I hope it gets taken over and the management given the boot.

threeputt

I'd appreciate a gander at APC Technology (LON:APC) also if you have time please Graham.
"APC intends to grow its business to revenue of Â£50 million to 75 million within 3 to 5 years, principally by growing its Components and Property Technology divisions", this from a current revenue base of £15m.
I like the change of structure in 2017, sale of existing loss making business and the focus on proven profitable business and I bought into it.
Both chairman and ceo both bought into todays acquisitional placing which was at premium to the existing share price, my fear would have to be where they intend to get the cash to grow to this £50m revenue, with a current nett debt of £4m and no or little cash generation and have I just answered my own question ?
I hold

Albertos

Look forward to your comments on Quartix. I can't see anything here that remotely justifies a PER of 30 - I presume there is something I'm missing.

Phil

(No; I'm not long in the other one)

barnetpeter

Morrisons....I notice a local press report today on their shelves being empty. In Bristol. Morrisons admit lots of shortages in certain foods. Where I live on the South coast there are almost daily complaints on social media about this in our local store. Huge gaps all over the store. Often little bread for instance. Never known this before. Cannot be good for profits and I wonder if other supermarkets are being affected. Something to ponder?

lyndhurst25

Apparently there were some big sells and a fall in the share price of Walker Greenbank (LON:WGB) yesterday afternoon before the 16:27 announcement. Maybe management were planning on an RNS this morning but their hand was forced by the news leaking out? Here's me naively thinking that insider dealing was illegal!

Small Cap Value Report (Wed 25 July 2018) - WGB, QTX, JOUL, BUR, NXR, APC

Walker Greenbank (LON:WGB)

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Graham Neary

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