[Podcast] GREGGS With Mark Atkinson And Maynard Paton

28 September 2022
By Maynard Paton

I have recorded another episode of The Private Investor’s Podcast with my good friend Mark Atkinson. We talked about Greggs and the investment potential of sausage rolls:

(Click to listen on Youtube)

We cover:

  • Mark buying more at £18.
  • How Greggs can survive the upcoming recession.
  • The superfans.
  • Financial history.
  • Productivity improvements and revenue per store.
  • History of family management/Ian Gregg.
  • Importance of staff to retailers.
  • The new CEO.
  • The 5-year plan and future growth prospects.
  • The cost of the 5-year plan.
  • Director option targets.
  • August’s H1 results and small-print.
  • Valuation.
  • Closing thoughts and wrap-up.

Happy listening!

Maynard Paton

PS: The recording took place on 26 September 2022.

SYSTEM1: £100m Revenue Ambition Disappears Following Disappointing H2 Loss As Tender Offer Cancelled And Agitated Shareholder Initiates Strategic Review

24 September 2022
By Maynard Paton

Results summary for System1 (SYS1):

  • A disappointing FY 2022 performance, with a Q4 sales warning alongside greater costs leading to a small H2 loss.
  • SYS1’s ‘Reasons to Believe’ have been diluted, and hint at reduced long-term expectations following the disappearance of a £100m revenue ambition.
  • The transition to new data and consultancy services continues, with such income representing 51% of total revenue for FY 2022 and possibly 70% for Q1 2023.
  • A fresh non-exec reveals the agitated shareholder who has initiated a strategic review, which in turn led to the sensible cancellation of a tender offer.
  • Net cash represents 31% of the market cap, with long-term multi-bagger potential presently obscured by weak legacy services and costs running ahead of new-product revenue. I continue to hold. 

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[SharePad] Small-Cap Spotlight Report: SHOE ZONE

23 September 2022
By Maynard Paton

Top of the shops among this year’s market carnage has been Shoe Zone.

The discount shoe retailer has enjoyed an amazing 46% share-price gain so far this year in a sector blighted by rising costs and recessionary fears:

(Source: SharePad)

A trio of upbeat trading statements caught the market’s attention this summer.

The first occurred during June and referred to “strong margin improvements“:

“29 June: Shoe Zone is pleased to announce that since the publication of its interim results in May, the business has been trading well and has also seen strong margin improvements and cost savings, in particular as a result of rent reductions and good supply chain management, which are expected to continue into Q4 of the Company’s financial year for the 52 weeks to 2 October 2022″.

The second update followed in July, and revealed “stronger than expected” trading:

“26 July: Shoe Zone is pleased to announce that since the publication of its trading update on 29 June 2022, trading has been stronger than expected due to higher than expected demand for summer products, particularly in the last two weeks. The Company has also continued to experience margin improvements as a result of good supply chain and cost management.”

And the third update occurred last month, and confirmed trading had “continued to exceed expectations“:

“31 August: Shoe Zone is pleased to announce that since the publication of its trading update on 26 July 2022, trading has continued to exceed expectations due to continued strong demand for summer and back-to-school products throughout August. The Company also continues to benefit from the margin improvements as outlined in recent trading updates.”

The remarkable run of RNSs also revealed the group lifting its current-year profit expectations from “not less than £8.5 million” to “not less than £10.5 million“.

The profit upgrades and share-price surge will of course be welcomed by shareholders, although the company’s longer-term performance could mean the positive summer may not be a persistent phenomenon.

The shares joined AIM at 160p during 2014 and, eight years later, the price stands at… 160p:

(Source: SharePad)

Let’s take a closer look.

Read my full Shoe Zone article for SharePad.

Maynard Paton

MOUNTVIEW ESTATES: Estimated NAV At £210 Per Share After H2 2022 Shows Average Sale Reaching £379k To Realise 66% Premium Over Allsop Valuation

02 September 2022
By Maynard Paton

Results summary for Mountview Estates (MTVW):

  • A steady FY 2022 performance, buoyed by an H2 that saw property sales achieve a record £379k average and realise a 66% premium to their 2014 Allsop valuation. 
  • The final dividend was lifted 11% while expenditure on new properties fell to a 13-year low after management expressed a desire to “not chase purchases at any price“.
  • Net debt remains very modest at just 5% of the property estate and reflects management’s concerns of forthcoming “difficult economic circumstances“.
  • Friction between major shareholders continues, with revised director-pay arrangements perhaps encouraging significant protest votes at the latest AGM.  
  • Net asset value remains at £101 per share, although the balance sheet could be worth £210 per share assuming all owned properties enjoy immediate ‘reversionary’ gains and are then sold at fair-market value. I continue to hold.

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[Podcast] SOMERO ENTERPRISES With Mark Atkinson And Maynard Paton

27 August 2022
By Maynard Paton

I have recorded another pilot episode of The Private Investor’s Podcast with my good friend Mark Atkinson. We talked about Somero Enterprises and the investment potential of the company’s concrete levelling machines:

We cover:

  • 00:00: Introduction to Somero Enterprises.
  • 01:47: The W-8BEN form.
  • 02:38: Mark’s first Somero purchase and moving brokers.
  • 04:51: The growth of e-commerce and the dying high street.
  • 06:20: Somero’s competitive advantage.
  • 07:31: Somero’s financial history and accounts.
  • 12:16: The international growth of e-commerce.
  • 13:30: The equipment Somero sells.
  • 15:01: Disclosure within the annual report.
  • 18:21: Management experience.
  • 20:31: Special dividends.
  • 22:08: Valuation and re-rating potential.
  • 28:41: Closing thoughts and wrap up.

We may record more podcasts if sufficient interest is shown.

Happy listening!

Maynard Paton

PS: The recording took place on 25 August 2022.

BIOVENTIX: H1 2022 Reveals Dividend Up 21% And ‘Exciting’ Tau Biomarker Although Cash At 6-Year Low Now Reduces Special-Payout Prospects

26 August 2022
By Maynard Paton

Results summary for Bioventix (BVXP):

  • An unspectacular H1 performance, albeit accompanied by a 21% dividend lift, after further pandemic disruption left revenue down 8% and adjusted profit down 9%.
  • Muted progress from vitamin D and other established antibodies continues to leave near-term growth dependent on the fast-selling troponin product. 
  • The “exciting” potential of a Tau biomarker alongside the BVXP website selling pyrene test kits suggest positive developments within the research pipeline.
  • Net cash at £5m is the lowest for six years, and combined with standstill earnings seems likely to reduce the size of any FY 2022 special payout.
  • Troponin’s finite income and a resultant sum-of-the-parts valuation do not indicate an obviously compelling £33 share price. I continue to hold.

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[SharePad] Screening For My Next Long-Term Winner: CERILLION

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25 August 2022
By Maynard Paton

Another month and another round of ‘back to basics’ filtering.

Introduced earlier this year to identify James Halstead, this screen shortlists companies that offer cash-flush balance sheets, robust margins and dependable dividends. SharePad returned 19 matches:

(Source: SharePad)

I selected Cerillion because the shares were among the few on the shortlist to have moved higher this year. I passed on EMIS and Cardiff Property because the former was subject to a bid and the latter was too small.

Cerillion’s shares have actually five-bagged since the pandemic lows of March 2020 and remain very close to their £11 all-time high:

(Source: SharePad)

Let’s take a closer look.

Read my full Cerillion article for SharePad.

Maynard Paton

ANDREWS SYKES: FY 2021 Discloses UK Hire Revenue Rebounding 17% To Deliver 34% Margin While Dividend Yield Remains Near 5% Despite Potential FY 2022 Heatwave Bonanza

18 August 2022
By Maynard Paton

Results summary for Andrews Sykes (ASY):

  • An encouraging performance, with profit recovering 35% following the pandemic to almost match the record set during FY 2018.
  • Additional reporting disclosures revealed ASY’s main UK Hire division enjoyed sales rebounding 17% and a wonderful 34% margin.
  • European operations expanded to 27% of group revenue following very strong progress, although Middle Eastern woes included an extra £1m provision. 
  • The books remain in good shape, with useful cash generation lifting net funds to £29m and perhaps increasing the possibility of another special dividend. 
  • An estimated 13-14x P/E and near-5% yield hardly seem expensive given the appealing financials, potential for an FY 2022 heatwave bonanza and scope for further European expansion. I continue to hold.

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TASTY: £8m Market Cap Could Still Be Remarkably Cheap After FY 2021 Reiterated 5-6 New Restaurants Despite ‘Prevailing Economic Uncertainties’

04 August 2022
By Maynard Paton

Results summary for Tasty (TAST):

  • The absence of pandemic restrictions ensured a bumper H2 performance that TAST acknowledged may not be repeatable during the current year.
  • Higher wages, rising utility costs, “prevailing economic uncertainties” plus a June update that did not refer to H1 trading could be other signs of FY 2022 not being that profitable.
  • Rent reductions of 27% now appear to be temporary, and explain why total lease obligations remain in excess of £50m.
  • Repaying an emergency loan, appointing a new executive alongside plans to open 5-6 new restaurants confirm management’s mindset has moved from ‘survival’ to ‘recovery’.
  • Although the £8m market cap could be remarkably cheap if TAST ever sustains a modest margin on decent sales, other shares could offer more dependable returns. I continue to hold.

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FW THORPE: Record H1 Results Reveal Thorlux Orders Up 25% And Another Special Dividend As Companies Scramble For Energy-Efficient Lighting

01 August 2022
By Maynard Paton

Results summary for FW Thorpe (TFW):

  • A record H1 performance bolstered by the acquisition of Spanish firm Zemper and complemented by another special dividend.
  • Progress at Thorlux continues to be modest, but a new MD, an order book up 25% alongside growing demand for energy-efficient lighting support future optimism.
  • Dutch profit was assisted by the absence of earn-out provisions, with new manufacturing facilities at Famostar underpinning “continued rapid sales growth“. 
  • Net cash remained significant at £37m after extra stock investment suggested component shortages were no longer as severe as they once were.
  • A P/E of 27 seems generous, but could reflect significant ‘ESG’ attractions as TFW showcases its environmental credentials to quoted companies scrambling for LED lighting. I continue to hold.

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[SharePad] Screening For My Next Long-Term Winner: LIONTRUST ASSET MANAGEMENT

28 July 2022
By Maynard Paton

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Use promo code mp25 to claim your 6-month discount. Click here for details. #ad

Difficult market conditions have prompted yet another bout of ‘back to basics’ filtering.

Introduced the other month to identify James Halstead, this screen short-lists companies that offer cash-flush balance sheets, robust margins and dependable dividends. SharePad returned 19 matches:

(Source: SharePad)

I selected Liontrust Asset Management because the shares were highlighted by ace fund manager Keith Ashworth-Lord within his latest Buffettology fund factsheet. Mr Ashworth-Lord wrote:

“Liontrust Asset Management (-15.5%) announced final results which showed substantial growth in average AUM (+43%), revenue (+41%), dividends per share (+53%) and free cash flow (+122%).

The reaction of Liontrust’s share price — which will be seen by the teenage scribblers in the City as high beta — is symptomatic of current market sentiment. As a result, the shares trade on a trailing free cash flow yield of 15% and a trailing dividend yield of 8%. Talk about ‘value’.”

Let’s take a closer look.

Read my full Liontrust Asset Management article for SharePad.

Maynard Paton

[Podcast] TRISTEL With Mark Atkinson And Maynard Paton

27 July 2022
By Maynard Paton

I have recorded another pilot episode of The Private Investor’s Podcast with my good friend Mark Atkinson. We talked about Tristel and the company’s hospital disinfectants and shareholder open day: 

We cover:

  • 0:00 Tristel’s open day and when we invested.
  • 1:31 Tristel’s business and disinfection chemistry.
  • 3:00 Tristel’s revenue and profit.
  • 5:56 The price I purchased and when I started selling.
  • 7:01 The latest trading update and the potential for US growth.
  • 12:51 The different products Tristel offer.
  • 16:21 Debtors and product restructuring. 
  • 18:26 The shareholder open day.
  • 20:90 High gross margins.
  • 21:92 Patent expiries.
  • 23:44 The CEO, CFO and the non-execs.
  • 26:24 A buy, hold or sell?
  • 29:41 Closing remarks.

We may record more podcasts if sufficient interest is shown.

Happy listening!

Maynard Paton

PS: Tristel’s open day took place on 18 July 2022 and the recording was made on 25 July 2022.

Disclosure: Maynard owns shares in Tristel.

M WINKWORTH: Outstanding FY 2021 Heralds Promising FY 2022 Following 23% Q1 Dividend Lift And Prospect Of Sales Again Exceeding Lettings

08 July 2022
By Maynard Paton

Results summary for M Winkworth (WINK):

  • Extraordinary levels of activity” due to pandemic stamp-duty reductions ensured an outstanding FY 2021 with underlying profit up 167%.
  • Talk of sales income again exceeding lettings income plus lifting the Q1 2022 dividend by 23% underpinned a promising FY 2022.  
  • Earnings at the company-owned Tooting office may have slumped during the year, although the effective return on the branch’s valuation remains impressive.  
  • A super 34% margin, net cash at more than 20% of the share price and trade receivables at just 7% of revenue leave the accounts in good order.
  • A possible 9-12x P/E and 6% yield match WINK’s past rating as investors presumably worry about potential problems within the housing market. I continue to hold.

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Q2 2022: 8 Years Of Special Dividends

30 June 2022
By Maynard Paton

Happy Thursday! I trust your shares continue to perform better than mine during 2022.

A summary of my portfolio’s progress:

  • Q2 return: -2.9%*.
  • Q2 trades: None.
  • YTD return: -15.7%* (FTSE 100: -1.0%)
  • YTD winners/losers: 2 winners vs 9 losers.

(*Performance calculated using quoted bid prices and includes all dealing costs, withholding taxes, broker-account fees and paid dividends)

My portfolio’s 2.9% Q2 drop leaves my shares 15.7% lower this year and nursing their worst half-year decline since I commenced this blog at the start of 2015. I think I have to go right back to the second half of 2011 to find a similarly underwhelming six-month performance.

At least Q2 did not reveal any major RNS disappointments. Andrews Sykes, Mountview Estates and M Winkworth in fact lifted their ordinary dividends while S & U and Tasty disclosed promising progress despite the uncertain economy.

But the market’s disillusionment towards smaller companies is leaving many of my shares marooned at best.

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S & U: Record Dividend Delivers 6% Yield After FY 2022 Results Signal Higher Expected Write-Offs And Risk Of ‘Adverse Economic Environment’

28 June 2022
By Maynard Paton

Results summary for S & U (SUS):

  • A “lower than normal” bad-debt provision underpinned a record full-year profit, which in turn supported fresh highs for net asset value (NAV) and the dividend.
  • Very mixed signals are emerging from the main motor-loan division, with encouraging collection rates offset by “a more heightened risk of an adverse economic environment” and higher expected write-offs among new loans.
  • Further surplus cash from the motor-loan division was redirected into the property-loan subsidiary, which reported a bumper performance and prompted optimistic near-term management predictions.
  • ROCE levels remain modest and suggest SUS’s inherent value is biased towards the asset value of its loan book rather than annual earnings.
  • Despite current-year profit running “above budget“, the £21 shares trade at 1.24 times NAV and offer a 6% yield. I continue to hold.

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