Quality UK Investment Blog
30 September 2015
By Maynard Paton
Quick update on Andrews Sykes (ASY).
Event: Interim results published 30 September.
Summary: Not a bad set of results, although the performance was flattered by the poor figures of 2014. The highlight was the positive outlook statement and the prospect of further second-half progress. While ASY may find long-term growth elusive, the accounts remain solid and the company continues to pay out all of its earnings as a dividend. I continue to hold.
21 September 2015
By Maynard Paton
Quick update on French Connection (FCCN).
Event: Interim results published 21 September
Summary: A grim set of figures that had been flagged by an earlier profit warning. News of further store closures and maintained gross margins were reassuring in the circumstances, but the real saving grace was the relatively positive outlook for the second half. There’s still a chance this share could one day prove to be a bargain, but for now its basket-case status remains intact. I continue to hold.
17 September 2015
By Maynard Paton
Quick update on FW Thorpe (TFW).
Event: Preliminary results published 17 September
Summary: Yet another dependable set of figures, with revenue, profit and the dividend reporting further advances — and all accompanied by the usual unpretentious management commentary. That said, it is TFW’s smaller divisions that are making the greatest strides at present — and it remains to be seen whether they can sustain such progress. Elsewhere, a recent acquisition is doing well and the balance sheet remains flush with cash. I continue to hold.
15 September 2015
By Maynard Paton
Quick update on City of London Investment (CLIG).
Event: Final results and annual report published 14 September.
Summary: No surprises here, as everything important was revealed within July’s summary figures. However, CLIG did confirm its funds under management had dropped by 17% during the recent market downturn and my sums are now starting to ask questions about the 24p per share dividend. All told, I do not feel comfortable with the current valuation and have therefore decided to reduce my holding.
09 September 2015
By Maynard Paton
Quick update on M Winkworth (WINK).
Event: Interim results published 8 September
Summary: A somewhat lacklustre set of results, blamed on a nervous pre-election housing market and extra costs associated with a corporate-relocation department. While the potential of additional lettings income looks promising, cash generation remains disappointing. I still like the simplicity of this franchising business, but must admit to having doubts about the size of its full potential. I continue to hold.
08 September 2015
By Maynard Paton
Quick update on Tasty (TAST).
Event: Interim results published 8 September
Summary: A very satisfactory set of results, with highlights including higher margins and a further acceleration of new restaurant openings. It certainly appears as if TAST will expand using debt rather than equity, though further borrowings will be needed for the business to become self-funding. I remain convinced the family management here can replicate its earlier success at Prezzo (PRZ) and can perhaps quadruple TAST’s market cap. I continue to hold.
25 August 2015
By Maynard Paton
Quick update on Record (REC).
Event: Business update published 25 August
Summary: A very disappointing statement. A major client has withdrawn $2.8bn from REC’s administration and I’ve had to slash my earnings guess by 27%. The shares have dropped significantly, though at 29p they remain valued at 10x possible profits and yield 5.7%. The business remains high margin and cash rich, but sadly still dependent on a small number of customers. I continue to hold.
24 August 2015
By Maynard Paton
Quick update on Mincon (MCON).
Event: Interim results published 19 August.
Summary: These figures were not too disappointing given MCON’s lacklustre first-quarter statement. A definite improvement occurred during Q2 and 15% margins suggest MCON retains a respectable competitive position. Nonetheless, the firm’s acquisition strategy remains unproven and working-capital demands are still very high. While a P/E valuation of 12-14 does not tempt me to top up, I continue to hold.
Today I’m summarising my current thoughts on French Connection (FCCN), a small-cap fashion retailer that continues to suffer from poor trading and which remains an under-whelming investment in my portfolio.
You can read my earlier Blog posts on FCCN here. But to cut to the chase, a trading statement in April owned up to weak retail sales and it’s likely the current year will witness FCCN’s seventh overall annual loss in eight years.
One day I’m sure a sustained turnaround here could deliver an exceptional share-price gain — although there is the real chance this company may never actually turn…
Anyway, prompted by FCCN’s share price falling steeply of late, I’ve weighed up the various pros and cons of what has become a very frustrating business and investment. Just to confirm, I continue to hold the shares.
5 August 2015
By Maynard Paton
Today I’m reviewing the six shares that reside on my Watch List. After all, there’s no point in me operating a Watch List if I don’t occasionally review the progress of my potential investments — and ensure I’m all ready to buy when their valuations become more attractive!
So here is what’s happened at my Watch List companies since the initial write-ups.
15 July 2015
By Maynard Paton
Quick update on City of London Investment (CLIG).
Event: Summary annual results published 15 July
Summary: A set of satisfactory outline results, commendably issued once again in double-quick time. But it was no real surprise to see CLIG downgrade some of its earlier growth assumptions, while new client money continues to be required to help earnings recover and lift the dividend. The accounts remain great and for now I’m content with the 24p per share payout and 7% income. I continue to hold.
26 June 2015
By Maynard Paton
Quick update on Mountview Estates (MTVW).
Event: Preliminary results published 25 June
Summary: MTVW’s best-ever results, albeit they included what looks to have been quite a weak finish to the year. Importantly, gross margins were high and management’s outlook continues to be positive. Furthermore, the dividend marched upwards once again. My sums point to a possible NAV of £180-plus per share based on the firm’s previous gains from its sold properties. I continue to hold.
16 June 2015
By Maynard Paton
Quick update on Record (REC).
Event: Final results published 16 June
Summary: Satisfactory results, with a positive outlook and a 10% dividend lift supporting my belief that REC’s recovery is gathering pace. However, news of a 10% company-wide salary hike for staff was not so pleasing, and my earnings guess for 2016 has been trimmed accordingly. Nevertheless, the accounts remain impressive and the valuation looks lowly, and I have bought more shares today.
04 June 2015
By Maynard Paton
Today I’m owning up to the second of two new investments I’ve made during the last few months.
I say ‘owning up’ because this second share has so far been a complete disaster. Indeed, what I thought could have been a ‘perfect stock’ has instead rewarded me with a 37% paper loss :-(
The company in question is World Careers Network (WOR), an obscure AIM-quoted business that develops and sells recruitment software for major employers.
I purchased the shares during February and March 2015 at an average price of 320p including all costs. The bid price now is 200p and the holding currently represents about 3% of my portfolio.
When I bought, I was convinced this £24m firm offered all the hallmarks of a successful investment. Alongside claims of supplying “world-class technology”, other attractions included a blue-chip client list, generous margins, a cash-flush balance sheet, respectable sales growth and a long-time founder/entrepreneur at the helm. Furthermore, a possible P/E of just 7 suggested the shares were a bargain.
However, events have since not gone my way as I will explain in a moment. And I dare say some investors would have never touched WOR in the first place due to its humungous bid-offer spread and dominant 80%-plus family ownership.
26 May 2015
By Maynard Paton
Quick update on Electronic Data Processing (EDP).
Event: Interim results published 26 May.
Summary: Another rather dull update from this rather dull software microcap. These results were a little disappointing on the revenue and profit fronts, but at least there was some useful progress on the balance sheet. One day I trust EDP’s business can advance significantly and provide some long-awaited excitement. Until then I’ll just have to make do with the uncovered 7.2% dividend yield. I continue to hold.
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