Small Cap Value Report (Wed 5 Apr 2017) - STY, HSS, LTG

Wednesday, Apr 05 2017 by

Good morning, it's Paul here!

I wrote about loads more companies last night. So in case you haven't seen it, yesterday's full report is here, and includes sections on the following companies;

Fulham Shore (LON:FUL)- in line trading update

Keywords Studios (LON:KWS) - good results, but pricey

Utilitywise (LON:UTW) - all sorts of problems, looks messy, I don't like this one at all

Next Fifteen Communications (LON:NFC) - good results, but relies on large adjustments. Weak balance sheet

Koovs (LON:KOOV) - a trading statement that tells us nothing about profitability, or financial position

Adept Telecom (LON:ADT) - good trading update

Universe (LON:UNG) - OK results for 2016

Flowtech Fluidpower (LON:FLO) - results & trading update sound pretty good

Topps Tiles (LON:TPT) - negative LFL sales, but profit still within range of market expectations

Nanoco (LON:NANO) - cash running out fast, and orders have (so far) failed to materialise

Thankfully it's a bit quieter today, and I have to be quick, as am off to an investor lunch at the RAC Club.

So today I intend writing about;

Styles and Wood (LON:STY) trading update

HSS Hire (LON:HSS) final results

Learning Technologies (LON:LTG) 2016 results

Here goes.

Styles and Wood (LON:STY)

Share price: 429p (down 8.3% today, at 10:10)
No. shares: 8.7m
Market cap: £37.3m

Trading update - this company describes itself as an;

"integrated property services and project delivery expert"

Profitability in 2016 seems to have been in line with expectations;

...anticipates delivering strong underlying profit and margin performance in 2016 with adjusted profit before tax in line with Board expectations.

As usual, we have to assume that the Board's, and the market's expectations are the same.

That sounds alright to me, so why is the share price down 8.3%? It seems to be due to these additional comments from the company today;

Following a review of…

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Styles & Wood Group plc is a holding company engaged in providing property services to banking and finance, retail and leisure, commercial and public sector organizations. The Company's segments include Professional Services and Contracting Services. The Professional Services segment includes portfolio services, such as program services, which creates roll-out programs for framework customers; design, which provides design and development services, and big data integration and analytics, which provides technology-based property information solutions. It also offers program management and implementation, which works with clients to develop, scope and implement programs. Its program services include activity scheduling, project management and control, life cycle modeling and workload planning, change and risk management, and data capture and generation of management information. The Contracting Services segment includes projects. It offers iSite Portal, HUB and iGO mobile solutions. more »

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HSS Hire Group plc provides tool and equipment hire and related services in the United Kingdom and Ireland through a network of over 300 locations across the nation. The Company's business focuses on supplying equipment and services to the fit-out, maintain and operate sectors of the market, with its businesses also supplying construction contractors. Its segments include HSS Core, which is engaged in the provision of tool and equipment hire and related services, and HSS Specialist segment, which is engaged in the provision of generator, climate control, powered access and cleaning hire equipment and the provision of cleaning maintenance services, under specialist brands. Its businesses include HSS hire, HSS One Call, HSS Training, ABird Power Solutions, Apex Power Solutions, Reintec cleaning equipment services and TecServ equipment maintenance. It caters to the customer base ranging from retailers and airports to facilities management companies and infrastructure developers. more »

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Learning Technologies Group plc (LTG) is a United Kingdom-based holding company. The Company is engaged in the provision of e-learning services. The Company is engaged in the production of interactive multimedia programs. The Company's portfolio includes LEO, a learning technologies firm, the multi-device authoring tool gomo learning, games with purpose company Preloaded and Eukleia, and an e-learning provider to the financial services sector. The Company's subsidiaries include Epic Group Limited, gomo Learning Limited, Leo Learning Limited, Leo Learning Ag, Leo Learning Inc, Preloaded Limited, Learning Technologies Group (Trustee) Limited, Eukleia Training Limited, Line Communications Holdings Limited, Line Communications Group Limited, Line Learning Limited and Line On-Line Limited. more »

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  Is LON:STY fundamentally strong or weak? Find out More »

13 Comments on this Article show/hide all

CliveBorg 5th Apr '17 1 of 13

"This company is ideally positioned to go bust in the next recession." Superb.

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bestace 5th Apr '17 2 of 13

A couple of things struck me while looking through the results for Learning Technologies (LON:LTG).

Firstly there are a couple of prior year restatements following a review carried out by the Financial Reporting Council's Conduct Committee. Maybe this is all above board but I'm not sure I like the idea of a regulator's conduct committee sniffing around a company.

Secondly, the retained earnings balance turned negative this year but they are still paying dividends, which I thought was illegal. I suppose it's possible the parent company has sufficient retained earnings while the group's retained earnings are negative in aggregate due to consolidation effects, but it looks odd and I would have expected some sort of narrative explanation.

No half decent auditor would let something like that slip through if something was really amiss, so I assume it's OK but maybe I am being naive with that assumption...

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Camtab 5th Apr '17 3 of 13

LTG were at the UK Investor show. Have to say I really like them but not bought shares in them because I feel they are a bit expensive. That said the CEO has a bucket load which is a good sign, as Nigel Wray keeps pointing out. But this may explain why the dividend is important to the company.

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AlanJenkins2 5th Apr '17 4 of 13

Hi,Paul.Any chance of a look at old favourite Dart DTG - even though it has grown a bit ?

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drvodkaquickstep 5th Apr '17 5 of 13

As usual Paul some excellent commentary and analysis. With respect to Styles and Wood (LON:STY) I have to beg to differ re: the potential valuation and attraction of consulting type business in this space as clearly demonstrated this week by the proposed acquisition of WS Atkins (LON:ATK) by SNC Lavelin at a multiple of around 1 x sales and a hefty double digit forward earnings multiple.

Numerous other consulting firms in this sector have been the subject of M&A activity over recent years, typically being acquired for 0.75 x sales. I dont hold Styles and Wood (LON:STY) but see value in this space and can foresee further M&A which could include the likes of Waterman (LON:WTM), Driver (LON:DRV), Aukett Swanke (LON:AUK), RPS (LON:RPS) and WYG (LON:WYG) amongst others.

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JamesrWilson1989 5th Apr '17 6 of 13

In reply to post #179150

I am a holder in Styles and Wood (LON:STY) so do believe they are undervalued but its worth noting that they are a contractor and not a consultancy like the others you've listed.

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drvodkaquickstep 5th Apr '17 7 of 13

James - yes you are of course correct and I forgot to clarify that key point although Styles and Wood (LON:STY) do offer a number of consulting services rather than being a pure contractor. Point noted, however!

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Ramridge 5th Apr '17 8 of 13

Re. £SKIN Just a heads up for IPO fans. First dealing date for a company called Integumen with a fantastic epic code SKIN. Apparently it sells products mainly for skincare.
I suspect it will be a few days before you see it listed on stocko..
I gave the admin doc a once over and found too many negatives for me. Market cap only £8m. ; loss making ; tiny revenues of £153K in last FY. I won't bother but please DYOR

Regards, Ram

ps. just checked sp and it is below the placing price of 5p. Not surprised.

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mcfly46 5th Apr '17 9 of 13

Would be interested to hear peoples thoughts on sirius minerals (LON:SXX) . Plenty of opinions on other boards (and plenty of ramping), but interested to know what you guys thought and if it really is too long away to be considered anything but a punt. Not sure if its small cap but noticed it had a similar market cap to purplebricks. Cheers

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Carey Blunt 5th Apr '17 10 of 13

There are some other threads on here about Learning Technologies (LON:LTG) which are worth reading including this one .

I'm long and bullish on Learning Technologies (LON:LTG) and have been for some time having first bought in Jan 2015.

I don't like the fact that they can't seem to put a figure on just how transformational the Civil Service work is - they should know by now how much they are going to make from the deal and when the money comes through. They are cagey about it which worries me. They could be stating the expected increase in revenue and profits but they aren't.

On the plus side with the Rustici acquisition they have effectively bought the company that defined the standard for e-learning packages. In theory the blend of companies that they now own should be able to provide killer e-learning software and deliver the software and training content results right across the globe. Very little large organised competition in this field.

The potential is huge but they do talk themselves and the SP up a bit early in my mind.

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ChrisW 5th Apr '17 11 of 13

In reply to post #179190

My simple rule on blue sky stuff like this, is not with the pole of the barge!

Normally if you want to invest in this kind of stuff, you have to be happy to throw twenties into the ground and hope fifties come up. Most of the time that doesn't happen.

Maybe on the third capital raise, we've had the first one back at the end of Nov, £330m.

Just my experience of 33 years of investing and making expensive mistakes.

Best of luck either way.


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JohnEustace 5th Apr '17 12 of 13

In reply to post #179190

Sirius Minerals (LON:SXX) may get a bit of a lift from transferring from AIM to the main market. But as an investment it would require a fair amount of patience and fortune, and after the last fund raising I fear shareholders are in the queue behind Gina Rhinehart when it does start to produce income.

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Ramridge 6th Apr '17 13 of 13

In reply to post #179180

Well, this is like London red buses time. Yesterday there was another first dealing date  IPO also in the business of skincare, called SkinBiotherapeutics (ticker SBTX) .
It is a demerger from Optibiotix which will retain approx 42% of the equity.
Placing price 9p, sp at close yesterday 13.5p
Check out ShareProphets site for more details.
The company will keep £4m out of the placing to fund development to commercialisation stages.

A huge warning : this is blue sky territory, more of a punt than an investment.

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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 »


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