Q2 2018: 1 Sell And Some Thoughts On Pension Deficits

30 June 2018
By Maynard Paton

Happy Saturday! I hope you continue to enjoy my Blog… and that your shares have been sizzling higher during the recent hot weather!

My portfolio has been simmering nicely throughout the last three months. In particular, positive second-quarter contributions from Bioventix and Getech have now added to the decent first-quarter efforts of M Winkworth, Mincon and Tristel. However, System1 has sadly joined Tasty as a notable 2018 loser.

It has all meant that, half way through the year, I am up 6.7% versus the FTSE 100 returning 1.7%. I am glad to be in positive territory following a tricky Q1, and I trust I can maintain a gap to the market during the second half.

Recent RNSs from my shares have been broadly positive. Once again there was a mix of statements, ranging from very satisfactory to rather lacklustre, and I am very happy that no major horror stories emerged!

There was one underwhelming update, though, which prompted a disposal and my portfolio’s only Q2 activity. Let me explain what has happened.

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Mountview Estates: 2018 Dividend Lifted 33% As Boss Admits Company Has A ‘Finite Life’

2 Replies

19 June 2018
By Maynard Paton

Update on Mountview Estates (MTVW).

Event: Preliminary results for the twelve months to 31 March 2018 published 14 June 2018

Summary: This RNS was more interesting for the management comments — all 626 words — than the actual 2018 financials. Indeed, MTVW’s chief exec is probably the first-ever boss to tell shareholders their business has a “finite life” and had essentially operated in an ex-growth market for 30 years. Hardly inspirational stuff… until you realise the dividend was lifted 33% and has now grown 47-fold during the last three decades. Mind you, this property-trading specialist will at some point have to call it a day — and dissolve an estate that could be worth almost double the current share price. I continue to hold.

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Castings: The 25-Year Dividend Record Now Shows 23 Increases, 2 Holds And No Cuts

2 Replies

15 June 2018
By Maynard Paton

Update on Castings (CGS).

Event: Final results for the twelve months to 31 March 2018 published 13 June 2018

Summary: These results came in below the engineer’s earlier expectations — but the performance did not appear too bad in the circumstances. Although CGS’s smaller machining division continues to lose money, its problems now look to be contained. Meanwhile, the larger foundry operation seems to be progressing well following a decent second half. A hefty cash position and the illustrious dividend remain key attractions, but the P/E of 13 does not suggest an immediate bargain. I continue to hold.

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System1: Boss Blames Buffett-Backed Bid For Client Cutbacks And 72% Profit Crash

5 Replies

08 June 2018
By Maynard Paton

Update on System1 (SYS1).

Event: Annual results for the twelve months to 31 March 2018 published 01 June 2018

Summary: A series of poor updates had already heralded what SYS1’s founder described as a “miserable” performance. However, shareholders did receive a candid explanation of what went wrong — with a Warren Buffett-backed bid to buy Unilever taking some of the blame. However, a greater concern is whether SYS1’s pioneering market-research techniques remain that pioneering — the competition is apparently catching up. A lot now rests on whether SYS1’s founder has the ability to lead another recovery. I continue to hold.

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Initial Reviews: AIREA, Octagonal And Richoux

5 Replies

25 May 2018
By Maynard Paton

Today I am experimenting with a new Blog-post format that covers short-ish reviews of three different companies.

The shares involved this time are all small-caps:

* AIREA (AIEA): This flooring group recently received bid interest from quality operator James Halstead. Although the share price seems cheap and offers asset backing, there is no evidence yet of any long-term business qualities.

* Octagonal (OCT): High margins, attractive growth and net cash are among the attractions at this niche financial-services firm. However, management’s ‘connections’ are not those you would associate with tip-top executives.

* Richoux (RIC): A bombed-out share price and Kaye family involvement bring me to this somewhat muddled restaurant group. Can the new boss lead a turnaround… and repeat the multi-bagger success he enjoyed at Prezzo?

Let’s see if any of this trio are worthy of further investigation.

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Andrews Sykes: 2017 Results Showcase 11% Profit Growth, A 24% Margin And £20m Net Cash

3 Replies

18 May 2018
By Maynard Paton

Update on Andrews Sykes (ASY).

Event: Preliminary results for the twelve months to 31 December 2017 published 18 May 2018

Summary: These results were quite satisfactory, although sadly the record figures I had hoped for did not entirely come through. Indeed, after a bumper first half, I note the second half could only match last year’s H2. Nevertheless, I was pleased the specialist hire group did not have to rely on “significant extremes in climatic conditions” to stimulate extra demand for its air conditioners, heaters and pumps. Meanwhile, margins remain high at 24%, net cash has grown to a hefty £20m and a 14x cash-adjusted P/E does not seem that excessive. I continue to hold.

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Best Of The Best: The Chief Exec Enjoys A 50% Shareholding And Has Quadrupled Online Sales During The Last 5 Years

2 Replies

16 May 2018
By Maynard Paton

Today I am continuing my hunt for Watch List shares by looking at Best of the Best (BOTB).

Here are the initial attractions that prompted this research:

* Long-time entrepreneurial ownership: The chief exec established the group during 1999, has been in charge ever since and continues to boast a 50% shareholding.

* Worthwhile growth history: Online sales quadrupled in value between 2012 and 2017 and currently represent 82% of total revenue.

* Conservative funding: The accounts have regularly showcased net cash and special dividends, and may in time enjoy a VAT reclaim windfall.

As usual, I am applying a question-and-answer template to help me pinpoint companies that match the criteria set out in How I Invest. I am looking for as many Yes answers as possible.

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World Careers Network: I Am Locked Into A 35% Loss Following A Stupid Company Rebranding And Likely End Of A Major Contract

5 Replies

01 May 2018
By Maynard Paton

Update on World Careers Network (WOR).

Event: Interim results for the six months to 31 January 2018 published 30 April 2018

Summary: Yet again the recruitment software developer delivered results that warned of greater costs and lower client fees. However, this statement was also accompanied by details of a company rebranding — which seems a complete joke project to me. Instead, management really should be addressing why the firm looks to have lost its largest customer. I have sat on a 35% loss here for three years now, and have been taught a tough lesson about illiquidity. Sadly I continue to hold.

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Record: Alarming 10% Fee Cut Smells Of Management Guff And I Have Sold Out

2 Replies

20 April 2018
By Maynard Paton

Update on Record (REC).

Event: Trading update for the three months to 31 March 2018 published 20 April 2018

Summary: REC has struggled to make any decisive progress for several years now. The firm’s currency-trading strategies have floundered, clients have regularly jumped ship, while those clients that have stayed have demanded lower fees. Now comes the alarming news that REC’s bog-standard currency-hedging service will cut its fees by 10% to keep clients happy. To add insult to injury, greater costs will be required to cater for this product “enhancement”. I have been frustrated with REC for quite some time, and have belatedly decided enough is enough. I have sold my entire holding.

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Q1 2018: 1 Top-Up And 3 Blog Enhancements

4 Replies

30 March 2018
By Maynard Paton

Happy Easter! I hope you continue to find my Blog useful… and that your portfolio has coped well with the sliding 2018 market!

So far this year, my portfolio has extended its behaviour from 2017. In short, positive contributions from a number of holdings (notably M Winkworth, Mincon and Tristel) have been offset by one substantial loser (Tasty).

It has all meant I have started 2018 down 0.3% versus a 7.2% drop suffered by the FTSE 100. I suppose losing less money than a falling market is not too bad, although I think I would prefer to be thrashed by a rising market — and actually make money.

Anyway, I am glad the RNSs from my shares have been broadly positive. There has been a mix of impressive to acceptable-in-the-circumstances results, with only my smallest holding — System1 — issuing fresh disappointing news.

My portfolio activity has been limited to just one top-up. Let me outline what has occurred.

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M Winkworth: Credible 2017 Figures Continue To Support 6% Yield Following Yet Another Foxtons-Beating Performance

6 Replies

29 March 2018
By Maynard Paton

Update on M Winkworth (WINK).

Event: Final results for the twelve months to 31 December 2017 published 28 March 2018

Summary: The London estate-agency group was never going to issue stunning figures. Nonetheless, a credible performance was reported and I am impressed the business continues to fare well against sector rival Foxtons. Note, too, that WINK’s average percentage commissions actually increased — so perhaps online competition is not that big a threat after all. Meanwhile, the books remain cash rich, the outlook does not seem too bad while the 10x multiple and 6% yield appear modest. I continue to hold.

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S & U: 2018 Results Showcase New Profit High As ‘Sensible Gear Changes’ Set To Control Soaring Bad-Debt Provision

2 Replies

28 March 2018
By Maynard Paton

Update on S & U (SUS).

Event: Preliminary results and presentation for the year to 31 January 2018 published 27 March 2018

Summary: These results from the car-loan specialist once again provided an investment dilemma. True, shareholders received yet another respectable progress report from the accomplished executive team. However, the finer details showed potential bad debts soaring 59% — which was double the growth rate of revenue and customer advances. The chairman is set to make some ‘sensible gear changes’ to keep a lid on potential bad debts, but until the changes become evident, the share-price multiple could be stuck at 13. I continue to hold.

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Bioventix: Record H1 Results Show Possible 30% Underlying Revenue Growth Alongside Encouraging Remarks About The New Troponin Product

4 Replies

26 March 2018
By Maynard Paton

Update on Bioventix (BVXP).

Event: Interim results for the six months to 31 December 2017 published 26 March 2018

Summary: The antibody specialist delivered another set of impressive results. I had been concerned about a possible ‘revenue gap’ emerging this year following the termination of certain product income. However, these concerns have now diminished — BVXP’s other sales still seem to be growing fast (I estimate at 30%) while management has become more confident about the early contribution from the new troponin product. The group’s financials remain top class and could even be improved if all of the royalties were collected on time. The 25x multiple is understandable, and I continue to hold.

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Mincon: 38% Full-Year Profit Surge Marks ‘First Year Of Current Upturn’ And Prompts A Welcome Lift To The Standstill Dividend

4 Replies

21 March 2018
By Maynard Paton

Update on Mincon (MCON).

Event: Final results for the twelve months ending 31 December 2017 published 20 March 2018

Summary: MCON’s subdued years of 2014, 2015 and 2016 now seem long forgotten after the mining-drill manufacturer confirmed a bumper set of 2017 numbers. Greater client activity has now fuelled director talk of “significant opportunities” and “the first year of the current upturn”, and the share price has naturally climbed to a premium level. Meanwhile, the accounts remain cash-rich, several factors may be suppressing certain ratios, and even the standstill dividend has been lifted. I continue to hold.

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FW Thorpe: Record H1 Figures Can’t Disguise Slowing Growth And Elevated 22x Multiple

Tasty: Phew! Not Heading For Bankruptcy Just Yet As £4m Property Proceeds And £1m Underlying Profit Compare To £8m Market Cap

21 Replies

13 March 2018
By Maynard Paton

Update on Tasty (TAST).

Event: Preliminary results for the 52 weeks to 31 December 2017 published 13 March 2018

Summary: Phew! I had thought TAST’s plunging share price was signalling these results would be accompanied by an emergency equity placing. As it turns out, the beleaguered restaurant chain continues to report a profit and has surprised me by raising £4m — equivalent to half of its market cap — from two property transactions. Furthermore, management now have a proper turnaround plan in place, the second half showed a few glimmers of hope while the upside could be considerable if a recovery ever occurs. I have bought more shares, both before and after these results.

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Town Centre Securities: 57 Years Of Unbroken Dividends And A Share Price 25% Below NAV

3 Replies

08 March 2018
By Maynard Paton

Today I’m continuing my hunt for Watch List shares by evaluating Town Centre Securities (TOWN).

Here are the initial attractions that prompted this research:

* Illustrious payout history: The business boasts an unbroken 57-year record of dividend payments.

* Substantial long-term shareholders: The founding/managing family boast a sizeable 52%/£78m investment.

* Discount to book value: The 281p shares trade at a 25% discount to the group’s 375p net asset value.

As usual, I’m applying a question-and-answer template to help me pinpoint companies that match the criteria set out in How I Invest. I’m looking for as many Yes answers as possible.

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Getech: 17-Month Results Provide Further Hope Of A Profit Rebound And Decent Share-Price Upside

4 Replies

02 March 2018
By Maynard Paton

Update on Getech (GTC).

Event: Final results for the seventeen months to 31 December 2017 published 28 February 2018.

Summary: A change of year end, various exceptional items, the effect of an acquisition and the company’s own ‘cost base’ definition meant studying these numbers was not straightforward. However, it was clear the geoscience software specialist has returned to profit, while it was also obvious the new boss remains confident about the group’s competitive attractions. Looking ahead, I am still hoping some encouraging revenue talk alongside tight cost controls could one day lead to much higher earnings and decent share-price upside. I continue to hold.

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Tristel: H1 Results Boast 24% Profit Jump Before North American Costs As EPA Decision Now Set For 16 April

6 Replies

23 February 2018
By Maynard Paton

Update on Tristel (TSTL).

Event: Interim results and shareholder presentation for the six months to 31 December 2017 published 20 February 2018

Summary: These first-half figures were slightly better than I had expected, with December’s AGM statement having downplayed the group’s underlying progress. Welcome revenue advances — both in the UK and abroad — were delivered by TSTL’s main disinfectant products, while adjusted profit would have soared 24% were it not for the costs of entering North America. Sadly it remains anyone’s guess as to when those costs will eventually see any payback. Nonetheless, the first North American milestone is looming — an EPA product approval decision is expected on 16 April, and the share price is optimistic. I continue to hold. Continue reading →

James Latham: The Family Owns 50%-Plus And Has Delivered 10% Long-Term Dividend Growth

City Of London Investment: Market Gains Deliver Best-Ever H1 As Increased Dividend Supports 6% Yield

8 Replies

19 January 2018
By Maynard Paton

Update on City of London Investment (CLIG).

Event: Trading update and shareholder presentation/summary results for the six months ending 31 December 2017 published 17 January 2018.

Summary: Favourable market movements helped CLIG report its best-ever first-half figures, with revenue, profit, net cash and the dividend all moving higher. However, the finer details showed the emerging-market fund manager struggling to capture new clients as its main strategy under-performed. Meanwhile, fee rates are still being chipped away and staff costs keep on climbing. The shares may look under-appreciated on a P/E of 10 and yield of 6%, but sadly a re-rating does not appear imminent. I continue to hold. Continue reading →

Q4 2017: 2 Top-Ups And Up 10.5% For 2017

8 Replies

01 January 2018
By Maynard Paton

Happy 2018! I trust you have enjoyed a successful year’s investing and that you continue to find my Blog useful.

I’m currently celebrating my third anniversary as a full-time investor — and I am reasonably satisfied with how things have turned out so far.

Indeed, with no income other than my capital gains and dividends, I am pleased my portfolio has recorded a positive performance during each of the last three years.

However, the three years have not been all plain sailing. In particular, I did wonder whether foregoing an annual salary was such a bright idea during the mid-2016 Brexit lows. Still, a recovery eventually emerged that has continued throughout 2017.

All that said, I’m disappointed to have under-performed the market for the second consecutive year. Unfortunately for me, a decent collection of 2017 portfolio winners was counterbalanced by one big loser.

Let me explain what happened.

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Year In Review 2017

6 Replies

01 January 2018
By Maynard Paton

Happy New Year!

I trust you have enjoyed the festive break and are now raring to do battle with the market for another twelve months!

This first Blog post of 2018 provides a ‘year in review’ of my current portfolio holdings. I recap how each of the underlying businesses performed during 2017, as well as provide a few remarks about valuation.

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Daejan: NAV Creeps To New £103 Per Share High And I Now Wonder Whether I Should Buy Once More

3 Replies

29 November 2017
By Maynard Paton

Update on Daejan (DJAN).

Event: Interim results for the six months to 30 September 2017 published 29 November 2017

Summary: From what I could tell from the chairman’s 216-word update, DJAN has had to work hard of late to achieve somewhat modest progress. Currency movements and Brexit apparently kept a lid on this H1 performance, although NAV still managed to creep to a £103 per share all-time high. Dull updates from low-profile businesses often cause share prices to stagnate, and so I’m not too surprised the property group’s discount to book has widened since I first bought during 2015. I now wonder whether I should buy once again. I continue to hold. Continue reading →

Mountview Estates: NAV Reaches Fresh £89 Per Share High Despite Weakest H1 For 4 Years

23 November 2017
By Maynard Paton

Update on Mountview Estates (MTVW).

Event: Interim results for the six months to 30 September 2017 published 23 November 2017

Summary: It took MTVW’s chief exec just 265 words to describe the group’s weakest first-half performance for four years. Still, the nature of this property-trading firm means earnings can be somewhat variable from time to time. What is important, though, is that net asset value improved once again to a fresh high while debt continues to be reduced to a new low. My sums point to a possible NAV of £209 per share based on the firm’s long-term margin. I continue to hold. Continue reading →

Record: Another Frustrating RNS That Leaves The Stock’s 5% Yield As The Main Highlight

20 November 2017
By Maynard Paton

Update on Record (REC).

Event: Interim results and shareholder presentation for the six months to 30 September 2017 published 17 November 2017

Summary: This was another frustrating RNS from the specialist currency manager. The cost base has ‘inevitably’ increased, yet revenue and client numbers remain stagnant and — as usual — there’s no real sign of the business enjoying an upturn anytime soon. At least REC continues to generate cash, retains a robust cash pile and distributes a healthy dividend. The yield is 5%, which is not too bad in the current market. I continue to hold. Continue reading →

Castings: H1 Figures Just About Acceptable As Profit Per Tonne Reaches New £322 High

10 November 2017
By Maynard Paton

Update on Castings (CGS).

Event: Interim results for the six months to 30 September 2017 published 10 November 2017

Summary: Last month’s statement concerning a review of CGS’s machining division had already braced me for worrying news. In the circumstances, this RNS was not too bad. Sure, the machining division has reported a loss and will cut back on certain projects. However, CGS’s main foundry operation appears to be performing very satisfactorily, with profit per tonne reaching a new high. I continue to hold. Continue reading →

World Careers Network: FY 2017 Figures Show Revenue And Cash At All-Time Highs, But Earnings Will Remain Depressed Until At Least 2019

03 November 2017
By Maynard Paton

Update on World Careers Network (WOR).

Event: Preliminary results for the twelve months to 31 July 2017 published 02 November 2017

Summary: These figures from the recruitment software developer were never going to be great. The overriding theme of the last three years — greater marketing and product investment — once again hit earnings and will continue to do so throughout 2018. The statement talked of some client-fee reductions, too. Still, at least overall revenue and the hefty cash position have both advanced to new all-time highs. Exactly when a profit revival will occur remains anyone’s guess — but I am hopeful the chief exec/71% shareholder will one day oversee a recovery. I continue to hold. Continue reading →

Getech: 2017 Results Spotlight Product Attractions And Recovery Potential From £9m Market Cap

31 October 2017
By Maynard Paton

Update on Getech (GTC).

Event: Interim results for the twelve months to 31 July 2017 published 31 October 2017

Summary: These results were never going to show a major turnaround, but glimmers of hope continue to emerge at the geoscience software specialist. In particular, a new chief exec has cut costs, reorganised the firm and spotlighted some of the company’s product attractions. True, minimal earnings are likely during the short term. But with the upbeat stock market making obvious buying opportunities hard to find, I am beginning to warm to GTC’s recovery potential. I continue to hold. Continue reading →

System1: H1 Profit Slumps 70% But Finer Details Provide Hope For Shareholders

27 October 2017
By Maynard Paton

Update on System1 (SYS1).

Event: Interim results and shareholder presentation for the six months to 30 September 2017 published 27 October 2017

Summary: The marketing-services group had already alerted investors to these disappointing figures. However, the setback was explained honestly by management and I note 50% of the business continues to grow at a fair rate. So everything does not appear completely lost just yet. That said, adopting the tag of industry ‘pioneer’ will always court competition and it seems rivals have tempted some customers away. The share price has been thumped since the summer, but is now looking quite interesting. I continue to hold. Continue reading →