ANDREWS SYKES: Water Pumps Rather Than Heatwave Scramble For Air Conditioners Drive Record FY 2022, Lift Net Cash To £37m And Support 20%-Or-More Margin For 20th Consecutive Year

19 April 2024
By Maynard Paton

NOTE: This blog post reviews ASY’s FY 2022 results published during May 2023. Readers will be alerted by email to my forthcoming blog post reviewing ASY’s latest H1 2023 results!

FY 2022 results summary for Andrews Sykes (ASY):

  • A record FY performance, with revenue up 10% and profit up 8% buoyed mainly by greater demand for water pumps rather than the scramble for air conditioners during the 40-degree summer.
  • Bolstered by strong Italian, Dutch and Belgian progress and defying problems in France, European revenue climbed 24% and represented a record 31% of the group’s top line during H2.
  • A £2m write-down of unpaid customer invoices appeared to draw a line under the group’s problematic Middle Eastern division.
  • Revenue per employee reached a new £151k high although hire revenue at 1.07x the cost of hire equipment indicated no real improvement to fleet productivity.
  • The accounts remain very favourable, showcasing net cash of £37m, a 26% return on equity and a 20%-or-more operating margin for 20 consecutive years. I continue to hold.

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M WINKWORTH: ‘New Blood’ Sought To 3-4x Revenue At Certain London Branches After ‘Challenging’ Market Reduces H1 2023 Profit By 26% And Leaves ‘Progressive’ Dividend Yielding 6.9%

31 March 2024
By Maynard Paton

H1 2023 results summary for M Winkworth (WINK):

  • Only the dividend advanced higher (+7%) after a “more challenging” property market alongside greater costs caused franchisee network income to decline 5%, revenue to remain flat and profit to drop 26%. 
  • WINK’s franchisees continue to report greater SSTCs and exchanges versus other agents, with sales commissions improving to an estimated £5.4k per transaction and “new blood” being sought to 3-4x franchise revenue at certain London branches. 
  • A third company-owned office seems on the horizon, although the departure of WINK’s successful Tooting manager plus unclear financial progress at Crystal Palace do raise questions about the in-house approach.  
  • A lower margin and adverse cash generation reflected this H1’s reduced sales activity, but a post-H1 update indicated a stronger H2 2023 that ought to include greater returns from franchisee loans. 
  • Projected earnings of c12p per share may limit increases to the 11.7p per share dividend, although net cash of £4m alongside owner-directors committed to a “progressive” payout should sustain the 6.9% yield. I continue to hold.

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S & U: Record H1 2024 Overshadowed By Subsequent 8% Dividend Cut As Economic ‘Headwinds’, Greater Regulation And Higher Debt Costs Leave £18 Shares Valued Below 1x NAV

24 March 2024
By Maynard Paton

H1 2024 results summary for S & U (SUS):

  • A record H1, during which larger loan sizes and lower-than-normal bad debts offset higher interest costs and pushed net asset value (NAV) to a fresh £18.86 per share high.
  • This H1 was then overshadowed by February’s trading update, which revealed H2 motor-loan collections alarmingly reduced from 94% to 90%, extra Q4 write-offs of approximately £5m and the second-interim dividend cut by 8%.
  • Greater FCA regulation, including the new Consumer Duty regime, is prompting SUS to revise its motor-finance lending and seems likely to lead to inherently lower margins, reduced transactions and higher regulatory-admin expenses.
  • Net finance costs absorbed a significant 12% of H1 revenue, with post-H1 debt increasing to £224m — equivalent possibly to 100% gearing — and borrowing rates perhaps now at 8%.
  • Tighter regulation, greater debt expense plus various economic “headwinds” leave the £18 shares at 2014 levels and below 1x NAV, a valuation that has occurred only occasionally during the last 30 years. I continue to hold.

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BIOVENTIX: End Of 7-Year Special-Dividend Run After Record FY 2023 Spotlights Encouraging Alzheimer’s P-tau217 R&D And Leaves £50 Shares Trading At 31x P/E

27 February 2024
By Maynard Paton

FY 2023 results summary for Bioventix (BVXP):

  • A record FY, with revenue up 9% and profit up 8% albeit split between a post-pandemic H1 rebound followed by a standstill H2.
  • Sales efforts were supported by best-seller vitamin D (+7%) and second-best-seller troponin (+30%), although the latter may not be too far away from reaching ‘peak’ revenue. 
  • Significant long-term progress continues to rest upon R&D success with the University of Gothenburg, which has published encouraging lab results using BVXP’s antibodies to identify early-stage Alzheimer’s through p-tau217.
  • While revenue per employee at a super £801k and minuscule £11k capex continue to underpin amazing cash generation, the total dividend was unchanged at 152p per share, dividend cover has reduced to almost 1x and the seven-year run of special payouts has now ended.
  • The £50 shares trade at a premium 31x P/E and reflect understandable Alzheimer’s optimism alongside the general revenue longevity and terrific economics of successful antibodies. I continue to hold.

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FW THORPE: Record FY 2023 Delivers 21st Consecutive Annual Dividend Increase, Suggests SchahlLED Acquired At 5x Ebitda And Justifies £35m Cash Reserve To ‘Some Shareholders’

11 February 2024
By Maynard Paton

FY 2023 results summary for FW Thorpe (TFW):

  • A record FY performance bolstered by acquisitions that showed total revenue up 23%, adjusted profit up 16% and the ordinary dividend lifted for the 21st consecutive year.
  • Largest division Thorlux continued to fare well, expanding by almost 30% helped by SchahlLED acquired at a possible 5x Ebitda.  
  • Mixed progress was experienced elsewhere, with Dutch profit down 8%, Zemper yet to show its full potential and the EV-charging joint venture going from profit to loss.
  • Despite acquisition payments of £19m, very respectable cash conversion left cash only £6m lower at a very useful £35m — a figure that required justification to ‘some shareholders’. 
  • A possible 20x P/E seemingly reflects TFW’s distinguished operating history and the persistent demand for energy-saving lighting rather than doubts about the significant acquisition expense and near-term prospect of subdued trading. I continue to hold.

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MINCON: Prospect Of H2 Profit Dropping 45% Overshadows Underwhelming H1 2023 And Heightens Concerns About Debt Covenants, Dividend Payments And Boardroom Strategy

01 February 2024
By Maynard Paton

H1 2023 results summary for Mincon (MCON):

  • An underwhelming H1 performance caused by reduced mining-customer activity, with revenue down 5%, profit down 12% and an unchanged dividend paid more than two months later than normal.
  • This H1 was overshadowed by October’s Q3 update, which warned of weaker sales, lower margins, exceptional costs and H2 Ebitda dropping 45%.
  • The Q3 update — and possibility of a difficult FY 2024 — heightened concerns about the group’s debt covenants, capital-intensive growth strategy, dividend payments and boardroom personnel.
  • Hopes of improved financials seem to rest upon a mining-customer revival, further geothermal installations plus R&D projects such as Greenhammer and subsea micropiling becoming commercial successes.
  • The shares currently trade below their 2013 flotation price and leave minority investors trusting the 56% family owners take the necessary action to safeguard the business. I continue to hold.

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TRISTEL: Positive FY 2023 Reveals Revenue Up 22%, New 5%-Plus Dividend-Growth Policy And Mooted 38p Royalty Per US Ultrasound Disinfection  

14 January 2024
By Maynard Paton

FY 2023 results summary for Tristel (TSTL):

  • A positive post-pandemic performance, with strong overseas progress helping FY ‘continuing’ revenue gain 22% and FY profit rebound up to 28% albeit after a bevy of adjustments.
  • The FY highlight was a doubling of the final dividend backed by a welcome new policy to increase the ordinary payout by at least 5% a year.
  • TSTL revealed ultrasound-probe decontamination supported 33% of group sales and implied a potential 38p royalty per ultrasound disinfection within the United States. 
  • The accounts showed a record 81% gross margin and net cash recently topping £14m, although restatements continue to occur and audit fees appear unusually steep.
  • An estimated 22x P/E for FY 2028 is not an obvious bargain, but a premium rating could be justified by further meaningful growth, lucrative US royalties and the prospect of fresh leadership. I continue to hold.

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My Portfolio: Year In Review 2023

02 January 2024
By Maynard Paton

Happy New Year!

I trust you enjoyed the festive break and are now ready to battle the market for another twelve months!

This 4,833-word post provides a ‘year in review’ of my current holdings. I recap how each business performed during 2023 as well as provide a few remarks about valuation. 

These reviews are very useful to write, not least because they help ensure I am still invested for the right reasons. Any upsets I will suffer during 2024 will most likely be caused by the shares I already own rather than any new shares I will buy.

I undertook the same annual review at the start of 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022 and 2023.

My portfolio gained 15.3% during 2023. This other post explains that performance in more detail and clarifies how my portfolio begins 2024.

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CITY OF LONDON INVESTMENT: George Karpus Explains AGM Protest Votes, Absence Of New Clients And ‘Tremendous Opportunities’ For Corporate Cash Management

19 December 2023
By Maynard Paton

AGM summary for City of London Investment (CLIG):

  • CLIG’s largest shareholder George Karpus voted against the group’s non-execs at the AGM and declared “this board should be replaced with a seasoned group of directors that understand the enormous potential of CLIG“.
  • My subsequent conversation with Mr Karpus revealed a somewhat alarming lack of board action following reduced funds under management, dwindling fee rates and a dividend he believes may become “questionable“.
  • They are not client driven” was how Mr Karpus summarised the absence of significant new mandates. Greater cross-selling between group divisions CLIM and KIM was still required, too.
  • Mr Karpus explained how a corporate cash-management service could lead to “tremendous opportunities” that might add an extra £1b-plus to CLIG’s funds under management during the next five years.
  • Mr Karpus also expressed frank views about the group’s approach to corporate governance, its use of consultants, the over-exposure to Russian shares and employees still working from home.

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CITY OF LONDON INVESTMENT: Profit Share Rising To 26% While FY 2023 Revenue Slides 16% Raises Further Questions About Employee Pay,  Future Margins And Viability Of 10% Dividend Yield

15 December 2023
By Maynard Paton

FY 2023 results summary for City of London Investment (CLIG):

  • Ongoing market “headwinds” caused average funds under management (FuM) to decline 12% to $9.2b, which led to revenue dropping 16% and profit diving 29%.
  • New USD reporting may expose CLIG’s prior progress benefitting from a weaker GBP, with the GBP dividend unchanged since FY 2021 versus the USD equivalent down 11%.
  • Significant new clients remain very elusive, with FuM outflows of $357m during this FY prompted by higher deposits rates and CLIM funds returning 3% (or less) five-year CAGRs.
  • The profit-share proportion increasing from 24% to 26% during a difficult FY raises further questions about employee pay and the likelihood of additional pressure on profit margins, earnings and ultimately the dividend. 
  • While CLIG’s own projections point to earnings of 34p per share that just about support the 33p payout and 10% yield, achieving the group’s total-return KPI to FY 2024 is looking increasingly uncertain. I continue to hold.

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MOUNTVIEW ESTATES: Lowly 50% FY Gross Margin Despite Record £395k Average Sales Price Signals Property Purchases Realising Limited Gains And Leaves £100 Shares Trading At NAV 

28 October 2023
By Maynard Paton

FY 2023 results summary for Mountview Estates (MTVW):

  • A lacklustre FY performance, with profit down 2% to the lowest level for ten years despite average property sales (excluding ground rents) rising 14% to a record £395k.
  • Property sales achieving a 50% gross margin, the worst for 14 years, suggest properties purchased following a 2014 valuation have realised very limited premiums on disposal.   
  • Debt remains under control at 12% of the property estate, although £56m was spent on new properties — the largest amount since FY 2008 — despite management talk of ongoing “difficult economic circumstances“.
  • Protest votes against the board’s composition and remuneration continue to increase, with property investor David Pears among the unhappy shareholders asking questions at the latest AGM.
  • The £100 shares trade at net asset value (NAV), which in theory prices in no future property gains, and offers a 5% income, the highest for decades aside from the banking crash. I continue to hold.

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BIOVENTIX: H1 Dividend Up 19% Might Indicate Small 8th Special Payout As Pipeline Potential Still Rests Upon ‘Exciting’ Alzheimer’s R&D That Runs To 2026

20 October 2023
By Maynard Paton

H1 2023 results summary for Bioventix (BVXP):

  • A record H1, with revenue up 25% and profit up 26% helped by a post-pandemic recovery and favourable currency movements.
  • Product sales were frustratingly conveyed through a broker note, which ‘estimated’ vitamin D income gained 11% and troponin income increased 52%.
  • Pipeline efforts and potential continue to rest upon “exciting” Alzheimer’s research, although the work looks set to run to 2026 and associated revenue may occur beyond 2030.
  • Repeating the 19% H1 dividend lift for the subsequent H2 would leave room only for a small eighth special payout, a prospect supported by remarks about taxation changes.
  • Forecasts for a flat H2, troponin’s finite income and a lack of near-term R&D winners may explain why the £35 shares have not made headway during the last four years. I continue to hold.

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S & U: £22 Shares Valued At Potential 1.15x NAV With 6% Yield After Positive FY 2023 Shows New ‘A Gold’ Borrowers And ‘Excellent’ Collections Supporting Healthy 18% Motor Loan-Book Growth

29 September 2023
By Maynard Paton

FY 2023 results summary for S & U (SUS):

  • A seemingly lower-than-normal bad-debt charge underpinned a very positive FY, which compounded net asset value (NAV) to a fresh £18.51 per share high and the dividend to a fresh 133p per share high.
  • New “A Gold” borrowers, rising used-car prices, bumper application numbers, “excellent” collection rates and waning pandemic issues led to healthy motor-finance progress, with a net loan book up 18%.
  • A “sparkling” property-finance performance witnessed a 78% net loan-book surge and impairments kept to a minimum, although the division’s returns on capital remain very modest.
  • Higher interest rates will hurt near-term margins and slow NAV growth, but debt costs remain amply covered by the estimated 20%-plus returns earned through the group’s most reliable customers.
  • Post-results updates acknowledging reduced lending and “economic headwinds” leave the £22 shares trading at a possible 1.15x NAV and supplying a useful 6% income. I continue to hold.

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SYSTEM1: Bumper Q4 Supports Stronger H2 2023 But New Marketing Course Raises Fresh Management Doubts And Leaves Disgruntled Shareholders Hoping For Trade-Sale Exit

15 September 2023
By Maynard Paton

FY 2023 results summary for System1 (SYS1):

  • A much stronger H2 versus the unsatisfactory H1, with disgruntled shareholders and proposed board changes prompting management to lift Q4 Data/Data-led revenue by a bumper 81%.
  • New partnerships and customer wins support the H1 strategic review, although partnership revenue and customer numbers remain frustratingly inconsistent and unclear. 
  • Progress at Test Your Idea/Brand continues to be slow, with rival Zappi taking market share and an upcoming marketing course raising fresh doubts about management’s Data-platform focus.
  • Vague signs of favourable ‘operational gearing’ may now be emerging, although regular adjustments and capitalised IT still complicate reported earnings.  
  • A deeply divided shareholder base and languishing share price may leave the door open for corporate activity, with global market-research groups hopefully able to recognise significant sales/cost benefits. I continue to hold.

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TRISTEL: Record 81% Gross Margin Supports Positive H1 2023 As FDA Approval Creates 43M Disinfection Opportunity Alongside Management Ambition To ‘Double Revenue Over The Medium Term’

28 August 2023
By Maynard Paton

H1 2023 results and FDA approval summary for Tristel (TSTL):

  • A positive pandemic-recovery performance, with H1 revenue up 16% to a record £17.5m and H1 profit rebounding up to 33% albeit after a bevy of adjustments.
  • A record 81% gross margin helped offset greater H1 staff costs, with useful cash conversion keeping net cash above £8m — which oddly earns no interest. 
  • The H1 effort was perhaps eclipsed by the subsequent FDA product approval, which creates the opportunity to capture 43 million US disinfection procedures and collect a revised 24% US royalty.
  • An informative open-day webinar revealed dividend cover was under review, option grants had been paused, H2 revenue per disinfection procedure had surged plus an ambition to “double revenue over the medium term“.
  • An estimated 23x P/E for FY 2026 is not an obvious bargain, but a premium rating could be justified by lucrative US income and management proposals to raise the group’s three-year targets. I continue to hold.

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