Small Cap Value Report (Wed 30 Oct 2019) - DLAR, SNX, EMR, REDD, HSP, AGL, NXT

29th Oct by Paul Scott

11 comments 5168 reads

Good morning, it's Paul here.

Formatting of pictures - I'm writing these articles in the new Stockopedia site now, so am learning how to format the pictures so that they work in both old & new sites. That went a bit wrong yesterday, as some pictures were over-sized when viewed in the old Stockopedia site. I've made them smaller now, so yesterday's article should now be easy to read in both old & new formats. Anyway, I know what to do now, so it should be fine for this point onward, whichever version of the site you are using.

Estimated time of completion - I have to be finished by 1pm today, with no extensions, as my cousin is coming over to visit, so I'm booked in to be Uncle Paul to his kids for the afternoon!

Update at 13:17 - today's report is now finished.

Agenda for today;

We'll start with 3 profit warnings - De La Rue (LON:DLAR) (yes, it's a small cap now), Synectics (LON:SNX) & Empresaria (LON:EMR)

After that I'll look at a couple of in line updates - Redde (LON:REDD) , Hargreaves Services (LON:HSP)

Then if there's enough time, I'll take a look at the Q3 trading update from Next (LON:NXT) (large cap bellwether, which I always report on here, because it's interesting for read-across to other consumer stocks) EDIT: sorry, ran out of time. We'll look at NXT another day.

As always, please do add your own comments below - it's a team sport!

De La Rue (LON:DLAR)

Share price: 147p (down c.21% today, at 08:13)
No. shares: 103.9m
Market cap: £152.7m

Trading update (profit warning)

De La Rue plc, the world's premier currency and authentication provider...

We've never written about DLAR before here, because it used to be a mid-cap. Amazingly, for such a prominent international business, the market cap is now down to only £150m.

Things started to go really wrong in 2017, as you can see from the 5-year chart below (note this has an integrated StockRank history chart below it, on the new Stockopedia site, which is a new feature that I really like);

As you can see from the vertical…

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MrContrarian

30th Oct

My morning smallcap tweet: Synectics: Wright bus, wrong way

De La Rue (LON:DLAR), ADVFN (LON:AFN), Avingtrans (LON:AVG), Synectics (LON:SNX), Hargreaves Services (LON:HSP), Redde (LON:REDD)

De La Rue (DLAR) in skid row as it warns FY operating profit will be significantly lower than market expectations. Guides H1 adj op profit low-to-mid single digit millions.
ADVFN (AFN) [last night] FY rev down 5%, EPS -1.6p (+1.53p). Supremo Clem Chambers seems undismayed. In H1 he "continued to look forward to the future with excitement."
Avingtrans (AVG) recent acquisition (from administration) Booth Industries wins £7.2m Government contract for safety doors.
Synectics (SNX) guides FY materially below market expectations due to delayed orders in the UK integration businesses in security and mobile transport. Wright Bus failure a factor.

My morning smallcap tweet: Synectics: Wright bus, wrong way

De La Rue (LON:DLAR), ADVFN (LON:AFN), Avingtrans (LON:AVG), Synectics (LON:SNX), Hargreaves Services (LON:HSP), Redde (LON:REDD)

De La Rue (DLAR) in skid row as it warns FY operating profit will be significantly lower than market expectations. Guides H1 adj op profit low-to-mid single digit millions.
ADVFN (AFN) [last night] FY rev down 5%, EPS -1.6p (+1.53p). Supremo Clem Chambers seems undismayed. In H1 he "continued to look forward to the future with excitement."
Avingtrans (AVG) recent acquisition (from administration) Booth Industries wins £7.2m Government contract for safety doors.
Synectics (SNX) guides FY materially below market expectations due to delayed orders in the UK integration businesses in security and mobile transport. Wright Bus failure a factor.

In line: Hargreaves Services (LON:HSP), £REDD

Edward John Canham

De La Rue (LON:DLAR)

Was speculatively watching this on the basis the market might have overdone the fall - evidently not.

The full statement:-

"De La Rue plc ("De La Rue") today announces a trading update from 1 April 2019 to date.

De La Rue expects H1 2019/20 adjusted operating profits for the half year ended 28th September 2019 to be low-to-mid single digit millions. Full year 2019/20 adjusted operating profit will be significantly lower than market expectations.

Management, led by the new CEO, is conducting a detailed review of the business and will update the market further when it reports its H1 2019/20 results on 26 November 2019."

The thought that crossed my mind was, given, I presume, a well resourced finance department - is that the best they can come up with a month after the period end.

Phil

No position

shipoffrogs

"low-to-mid single digit millions". Does that mean £2-7m?

Carcosa

De La Rue (LON:DLAR)

It should be noted the RNS refers to "adjusted operating profit" i.e. not including exceptionals (plus perhaps an additional allowance for the SFO investigation). For the comparative half year DLAR posted £17m so whatever has gone wrong has been spectacular!

mammyoko

Worked as an FD at the larger division (at the time) of De La Rue (LON:DLAR) a few years ago at their pink castle in Basingstoke. Financial and operational management were completely clueless then - knowingly over-paying for acquisitions and using the printing business cash cow to fund ill-judged forays into areas where they had no experience or competitive advantage. As a member of the generous DB pension scheme myself, I can confirm that this alone would put me off ever investing here. I always thought that Crystal Amber Fund (LON:CRS) had taken on more than they realised. Like them, I suspect that there is a good business in there somewhere but it's probably one that can't support the expensive lifestyle of its central admin function.

FREng

There's an interesting RCS announcement from Bango (LON:BGO) this morning about a partnership deal with South Korean big data digital advertisement specialist NHN ACE.

The excellent TechMarketView daily email continues "Cambridge-based Bango has been cutting quite a dash on the world stage
of late. End User Spend (EUS) going over its platform more than doubled
to £465m yoy in the six months to June 2019. This rapid growth
maintained the five-year trend of more than 100% p.a. increase in EUS.
H119 revenue was up 64% to £4.3m and EBITDA moved into positive
territory for the second quarter if this FY. This British success story is definitely one to watch."

I hold.

Paul Scott

Wonderful stuff, thanks mammyoko!

Very good point, which I didn't pick up on, thanks Carcosa!

Alison Smythe

Next (LON:NXT) "Probably the only retail share I'd want to own."

Hopefully apart from Sosandar (LON:SOS) !

purpleski

Hi Alison

I think Paul means retail that still has a substantial portion of sales from bricks and mortar!

Michael

Small Cap Value Report (Wed 30 Oct 2019) - DLAR, SNX, EMR, REDD, HSP, AGL, NXT

De La Rue (LON:DLAR)

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Paul Scott

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