Small Cap Value Report (Wed 26 June 2019) - Discussion At IG, CRL, DPEU, RM2

26th Jun '19 by Graham Neary

20 comments 6469 reads

Good morning!

Huge thanks to Paul for covering for me yesterday, after I suffered severe travel delays.

Speaking of yesterday's report, Paul added a further six sections in the evening, so it's now an omnibus report. Here's the link.

Some stories I'm covering today (list evolving):

DP Eurasia NV (LON:DPEU) - "value realisation" (sale) by major holder
RM2 Update
Creightons (LON:CRL) - results
Zoo Digital (LON:ZOO) - results

One of my activities on Monday was a recorded discussion at the offices of IG Group (LON:IGG).

Chris Boxall and I pondered the merits of H & T (LON:HAT), Ramsdens Holdings (LON:RFX), AdEPT Technology (LON:ADT), Pressure Technologies (LON:PRES), Duke Royalty (LON:DUKE), Park (LON:PARK), Quartix Holdings (LON:QTX), Rosenblatt (LON:RBGP) and PCF (LON:PCF). (I am long IGG, HAT, DUKE, PARK, PCF).

We were encouraged to disagree with each other, for the sake of good television! Here's the link.

Before getting into Wednesday's news, there was an announcement at Creightons (LON:CRL) yesterday:

Creightons (LON:CRL)

Share price: 35p (+6% on Tuesday)
No. of shares: 62.5 million
Market cap: £22 million

Acquisition of Balance Active Formula

(Please note that I have a long position in CRL.)

By the time you read this, Creightons is likely to have published its results for FY March 2019.

In advance of that, the company has released some details on a small acquisition. The purchase price isn't given.

What has it bought?

Creightons now owns "the brand equity, customer list and existing stock" of Balance Active Formula (BAF).

This is a skincare specialist whose products include Snake Venom Wrinkle-Freeze Serum and Dragon's Blood Instant Eyelift Balm.

The announcement…

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Edward John Canham

26th Jun '19

Bonmarche Holdings (LON:BON)

Board now recommends accepting bid by Mr Day after poor recent trading.

Phil

MrContrarian

My morning smallcap tweet: BON humiliated as it accepts lowball offer

RPS (LON:RPS), Image Scan Holdings (LON:IGE), Air Partner (LON:AIR), Vianet (LON:VNET), Bonmarche Holdings (LON:BON), Avingtrans (LON:AVG)

RPS (RPS) guides FY materially below management and market expectations which are fee income £594m, pretax £50m.
Image Scan (IGE) guides FY loss due to gov'ts delaying portable X-ray machine orders. So many cos fail to account for gov't bureaucracy, incompetence and indecision in their plans.
Air Partner (AIR) AGM stmt. Expects to meet F/C but H2 weighted.
Vianet (VNET) AGM stmt: first 2 moths slightly ahead of the Board's expectations.
Bonmarche (BON) trading so poor it swivels from telling Spectre Holdings to get lost with its 11.445p mandatory offer to yes please. That's a 26% discount!
Avingtrans (AVG) guides FY rev £104m, 8% ahead of F/C, adj pretax .£5.2m, 21% ahead.

jonno

Sparkling update from Avingtrans (LON:AVG) ahead of September prelims. Trading ahead of expectations, turnover 8% ahead at £104m and operating profit pre-exceptionals 18% ahead at an expected at £5.8m. Expects to report profit before tax of £5.2m, 21% ahead of expectations. Net debt is also down significantly. There is a lot of detail in the RNS regarding recent acquisitions and contract wins. I hold.

I await the prelims from CRL and Graham's comments with interest.

Cisk

Avingtrans (LON:AVG) update reads well. Can’t help but think their acquisition of Hayward was perfectly timed. And recent buy Booths was also at a good price.

Patrick L

Fantastic results at Creightons (LON:CRL) this morning, continuing the recent good run. Thanks for flagging this one in previous reports Graham as one to look into. Its more than paid for my stockopedia subscription!

Steves cups

Hi Graham
For some reason I could not find Creightons (LON:CRL) results on investegate this am (later found on LSE) but agree with paraic regarding absolutely fantastic results. Because There are no forecasts I had tried to estimate these and got a large increase in Profits but not to to this degree. SP up 11% as I write.
Graham Can you do a commentary?

PIWorld are hosting their presentation this afternoon - well worth a listen to down to earth management

andrea34

The results from Creightons (LON:CRL) do look really good, and of course I'd already be in profit now if I had bought even last week.... but where is the outlook comment??? All they say is "We will continue to invest to enhance production and operational capability to enable the Group to sustain profitable operations...". Sustain? What about grow? I find this slightly worrying...

I'd appreciate any comments on SysGroup (LON:SYS) please - the pre-adjusted finals (pre-amortisation, etc) look good to me with revenue+22%, EBITDA+41%, gross margin 61%(57%), adjusted eps 3.1(2.3); current strong trading continues into the current year.

shailenpatel

Air Partner (LON:AIR) update - the dreaded second half weighting to make everything better

Wimbledonsprinter

Andrea I agree that Creightons (LON:CRL) (I hold) has poor communication strategy, with no broker and no research. The company is holding a live webinar at 2pm today (as it usually does on results day) when I would say they are usually quite open about current trading and outlook. Details of webinar in 20 June RNS.

The lack of an outlook section in the report is I think standard for Creightons. The long-stated "aspiration" is to get to £60m of sales by 2020/21 with a 5% net margin (raised at the last interims to a possible 7% net margin). If these numbers are achievable (and the £60m sales number has always looked a stretch to reach organically), the stock still looks cheap.

My usual worry about this Creightons (LON:CRL) is the recent poor cash flow conversion, as working capital has eaten up cash (but in H2 net debt has been reduced sharply from the Sep 18 figure). My "new" worry now would be why the branded sales showed such weak growth in FY19, implying negative growth in H2.

Jonathan C

There is usually something to worry about with Creightons (LON:CRL). Go with the proven management.

Thanks WS - if you listen to the Webinar it'd be great if you could please post an update :-)

-2

robbiep

RPS and WYN to add to your list. Thanks

Snoo

Creightons (LON:CRL) I quite like their model, as Graham mentioned their operations are very lean.

I see them as an incubator of sorts for brands, some are going to work out and become slightly more premium and transition to better selling points, others will remain generic and stay in the pound shop.

I quite like the upside, I think I can understand what they are doing (raising status of brands allows easier access to international markets).The brands have a website in their own right and their own social media accounts but it seems this is all running off Creightons centrally so very cheap to run.

It might be possible for one day a brand to leave the stable and be sold for a decent price, in which case something else will be born, or in the case of Balance Active Formula, be bought.

They seem to understand their products well and they have expertise in manufacturing, a nice combo.

brucepackard

Not quite sure what to make of Solid State (LON:SOLI) is it a "good" profit warning, disguised as a contract win? IE implies upfront costs, but good long term prospects. I'm confused - but maybe that's because it's a hot day and I need to wrap a cold towel around my head!

davidjhill

Solid State (LON:SOLI) neither Bruce. It is basically saying that there will neither be an uplift or impact on profits in current year. ie any incremental revenues will be offset by upfront costs but the future potential is great. Looks fine to me as they have only recently upgraded profit forecasts.

Graham Neary

Hi Steves, yes, working my way towards Creightons (LON:CRL) this morning. Cheers. G

abtan

An interesting statement from Air Partner (LON:AIR) (which I hold).

On May 9th they stated that "Current trading is slightly ahead of the prior year."

May 9th was 3 months of the company's financial year, so this implies that the company seemed confident of beating, or least matching, H1 2018/19, where underlying profit before tax was £4.2m.

To put that into context the adjusted EV of the company (stripping out customer's cash) is £32m.

So this looks cheap on H1 alone!

The focus today seems to be on the dreaded 2nd half weighting comment - it's not one I usually like either.

But if H2 profits are greater than H1 profits, then surely adjusted profit before tax will be £4.2m * 2 => £8.4m.
And even if H2 is lower than £4.2m, that still seems a remarkable outcome for a company with an EV of £32m (or a market cap of £45m).

Or am I missing something?

A

Martin van Buren

Yes, a very good update of Avingtrans (AVG):

- good organic growth
- many impressive orders won
- margins steadily increasing (CFO said EBITDA margin in mid teens should be attainable, now just shy of 10%)
- good cashflow and therefore Net Debt significantly down
- announced three acquisitions this year, aggregately adding nearly 20m GBP of revenue for a purchase price of just 2,8m GBP. When they are able to increase margins in these businesses, in which they have already shown their capability, then these acquisitions can be significantly earnings accretive.
- weak GBP will help earnings next year by currency translation.

I'm a content holder.

Andrea - I don’t do webinar write-ups. :-). But if you are interested in the company, I presume it will soon be up on PI World, as are the previous ones. Creightons (LON:CRL) is amazingly open in these meetings - they are well worth looking at, particularly as there is no broker coverage. The key points from any meeting will be different per individual viewpoint. The key takeaways from me on this was:
1) Creightons (LON:CRL) are once again trying to go full steam ahead and acquisitions seem to be back on the agenda.
2) The 2024 aspirations are for £100m of sales at a 8% post tax profit margin.
3). CRL see growing digital sales (from virtually nothing now) as critical.

4) On the low sales number for branded goods they had a couple of explanations: a) they had pulled back from licensed brands and b) they had pulled back from a couple of retailers where they had doubts about the medium term prospects.

27th Jun '19

Graham
Watched the IG discussion with Chris Boxall. Good TV. Thanks for letting us know. Some interesting views.

As last year the Creightons (LON:CRL) presentation well worth watching for us non health & beaty experts. As always much more information disclosed in addition to their rather short results RNS.

Look after yourself

Small Cap Value Report (Wed 26 June 2019) - Discussion at IG, CRL, DPEU, RM2

Creightons (LON:CRL)

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Graham Neary

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