01 January 2019
By Maynard Paton
Happy New Year!
I trust you enjoyed the festive break and are now raring to do battle with the market for another twelve months!
This first Blog post of 2019 provides a ‘year in review’ of my current portfolio holdings. I recap how each of the underlying businesses performed during 2018, as well as provide a few remarks about valuation.
Continue reading07 December 2018
By Maynard Paton
Update on Daejan (DJAN).
Event: Interim results for the six months to 30 September 2018 published 28 November 2018.
Summary: The commercial property group once again delivered record first-half revenue and net asset value (NAV) figures — despite the chairman’s persistent economic and political worries. The 203-word statement gave little else away, which has allowed the share price to continue to drift and the discount to NAV widen to 50%. Such a valuation has typically rewarded patient investors of this low-profile share, and I have recently bought more.
07 December 2018
By Maynard Paton
Update on Mountview Estates (MTVW).
Event: Interim results for the six months to 30 September 2018 published 22 November 2018.
Summary: The property-trading specialist revealed its weakest first-half performance since 2013 after selling eleven fewer houses than this time last year. Furthermore, the 133% investment return achieved from those disposals was below MTVW’s ten-year average. Nonetheless, net asset value (NAV) still managed to creep to a fresh £92 per share high. Meanwhile, dissident shareholders continue to vote against MTVW’s directors and may be growing in number. The £100 shares do not appear expensive on an NAV and yield basis, and I have recently bought more.
15 November 2018
By Maynard Paton
Update on Castings (CGS).
Event: Interim results for the six months to 30 September 2018 published 13 November 2018.
Summary: CGS’s results were acceptable but contained several irritating drawbacks. In particular, a recovery at the engineer’s troubled machining division has been seemingly postponed for two years. Furthermore, management has now downgraded customer demand from “strong” to “steady”. Oh, and a depreciation review inflated group profit by 10%. CGS does have strengths — not least its cash pile and dividend history — but I suspect the firm’s stalled earnings will keep the shares marooned for now. I continue to hold.
07 November 2018
By Maynard Paton
Update on Oleeo (OLEE).
Event: Preliminary results for the twelve months to 31 July 2018 published 02 November 2018.
Summary: Publishing results at 4:28pm on a Friday is never a good sign. And sure enough, the recruitment software outfit warned of yet another profit slump. Still, at least revenue inched to a new record as the firm enjoyed greater subscription income. Meanwhile, an anonymous tip-off has set me straight about OLEE’s contract with HMRC — the deal appears not to have been lost after all. All I can do now with this illiquid share is hope for an earnings rebound. I continue to hold.
06 November 2018
By Maynard Paton
Update on System1 (SYS1).
Event: Interim results for the six months to 30 September 2018 published 02 November 2018.
Summary: A couple of earlier updates had already signalled this lacklustre first-half performance. Indeed, several references to competitive pricing and re-designed products implied the advertising research specialist may no longer be the ‘pioneering’ force it once was. Furthermore, the new Ad Ratings service could be hard pushed to become a real money-spinner and return the group to growth. That said, margins remain good, there is cash in the bank and the P/E might be 9… if you believe some significant development expenditure will eventually pay off. I continue to hold.
26 October 2018
By Maynard Paton
Update on Tristel (TSTL).
Event: Final results for the twelve months to 30 June 2018 published 17 October 2018 and shareholder presentation hosted 18 October 2018.
Summary: I was broadly satisfied with these full-year figures, which set new records for revenue, profit and the dividend. However, the statement and City presentation provided numerous little niggles — not least a bizarre management decision that has delayed product approval within the United States for a further six months. Still, TSTL’s collection of medical disinfectants continue to produce attractive accounts and perhaps their biocidal qualities have been underlined by recent deals with the NHS and Parker Laboratories. I continue to hold.
12 October 2018
By Maynard Paton
Update on Bioventix (BVXP).
Event: Preliminary results for the year to 30 June 2018 published 08 October 2018.
Summary: The antibody specialist delivered yet another set of record results, with my number-crunching indicating underlying growth of 20%. However, I was disappointed to discover early sales of the important new troponin product had been below expectations — and may have left the lofty P/E valuation open to debate (at least for now). Still, the business continues to exhibit magnificent accounts while a special dividend for the third consecutive year underpins the board’s confidence. I continue to hold.
08 October 2018
By Maynard Paton
Update on Getech (GTC).
Event: Interim results for the six months to 30 June 2018 published 28 September 2018.
Summary: These figures were not as good as I had hoped. The lowest first-half sales for seven years created a not-insignificant operating loss and left cash flow dependent on tax refunds. Still, the geoscience software specialist talked of a stronger second half and I remain hopeful the accounts will eventually showcase the high margins and expanding revenue the directors continue to predict. For the time being, I just have to trust a stronger oil price can one day tempt GTC’s customers to increase their spending. I continue to hold.
01 October 2018
By Maynard Paton
Update on Andrews Sykes (ASY).
Event: Interim results for the six months to 30 June 2018 published 28 September 2018.
Summary: Widespread snow followed by a glorious heatwave were always going to prompt demand for ASY’s heating products and air conditioners during this first half. However, I did expect the equipment hire firm to have recorded sales growth in excess of the 7% actually reported. Still, operating profit gained 14% while the accounts continue to showcase high margins and surplus cash. Plus, the second-half ought to show bumper figures and help deliver the firm’s best-ever annual performance. I continue to hold.
28 September 2018
By Maynard Paton
Update on S & U (SUS).
Event: Interim results and presentation for the six months to 31 July 2018 published 25 September 2018.
Summary: SUS reported satisfactory first-half progress, with the group’s main car-loan division now set to deliver its 19th consecutive year of growth. The performance was accompanied by the usual drawbacks — tighter underwriting leading to fewer new customers, and debt write-offs continuing to soar (this time by 32%). The group’s boss reckons we’re at a “relatively late stage of the economic cycle”, too. Still, I remain happy to collect the 4.4% yield and back the veteran directors who carefully steward their £134m family shareholding. I continue to hold.
25 September 2018
By Maynard Paton
Update on Tasty (TAST).
Event: Interim results for the 26 weeks to 1 July 2018 published 21 September 2018.
Summary: The hapless restaurant chain delivered a rather dismal — but not completely disastrous — set of first-half figures. “Unfavourable” weather was partly blamed for underlying sales falling approximately 4%, which in turn led to an operating loss. The numbers also carried a further substantial write-down while net debt jumped following adverse cash movements. But recovery hopes still remain — costs have been cut, menus have been re-jigged and some sites are even “outperforming expectations”. I continue to hold.
21 September 2018
By Maynard Paton
Update on FW Thorpe (TFW).
Event: Preliminary results for the twelve months to 30 June 2018 published 20 September 2018.
Summary: The specialist lighting manufacturer delivered its fifth consecutive year of record results, although describing an underlying 2% profit advance as “excellent” overplayed the performance somewhat. Still, the figures were a touch better than I had expected and showcased all the usual financial attractions — decent margins, vast surplus cash and robust reinvestment returns. Sales of some new high-tech products apparently “rocketed”, too. That said, TFW suffered mixed divisional performances while the share-price rating remains rich. I continue to hold.
13 September 2018
By Maynard Paton
Update on M Winkworth (WINK).
Event: Interim results for the six months to 30 June 2018 published 12 September 2018.
Summary: These results were quite satisfactory and actually revealed record first-half revenue — despite the estate-agency group remaining dependent on London’s difficult property market. In fact, the confident management narrative said sales commission rates had increased and also described online rivals as “digital experiments”. Meanwhile, the accounts seem in decent shape, the outlook appears relatively encouraging and the valuation is hardly extended. I continue to hold.
23 August 2018
By Maynard Paton
Update on Mincon (MCON).
Event: Interim results for the six months ending 30 June 2018 published 13 August 2018.
Summary: MCON extended its bumper 2017 progress with some very satisfactory first-half figures. The specialist drill manufacturer claimed greater orders from the mining sector had supported 12% organic sales growth, while my sums suggested a robust 19% operating margin was reached during the second quarter. In addition, current trading appears healthy and a recent acquisition may have performed much better than expected. However, a P/E in excess of 20 probably reflects all of the positives, especially given cash conversion remains below par. I continue to hold.
01 August 2018
By Maynard Paton
Update on City of London Investment (CLIG).
Event: Trading update and shareholder presentation/summary results for the year ending 30 June 2018 published 17 July 2018.
Summary: Bumper first-half figures and subsequent monthly updates had already ensured the fund manager’s summary annual results would be positive. However, the second half did witness funds under management decline and the group’s own projections for the coming year have now been reduced. In addition, client fees have been cut once again while the main emerging-market strategy continues to underperform. I still hope that, one day, this cash-rich, high-margin business can attract meaningful new mandates to spark a share-price re-rating. Until then, a 6.8% income remains available. I continue to hold.
27 July 2018
By Maynard Paton
Update on Daejan (DJAN).
Event: Preliminary results for the year to 31 March 2018 published 17 July 2018
Summary: The commercial property group once again left its numbers to do most of the talking, as new all-time highs for revenue, net asset value and the dividend were accompanied by only two paragraphs of management commentary. A bonus this year was US tax changes adding £40m to the balance sheet, which now stands at £111 per share and continues to dwarf the £64 share price. Conservative borrowing levels, veteran family management and an illustrious track record remain the foundations of this investment, and, in theory at least, a 14% earnings yield is available, too. I continue to hold.
20 July 2018
By Maynard Paton
Update on Tristel (TSTL).
Events: Trading update for the year ending 30 June 2018 published 13 July 2018, director share sales published 16 July 2018 and shareholder open-day presentation hosted 17 July 2018.
Summary: Earlier this week I attended TSTL’s third annual open day, and this year the event was accompanied by news of hefty director selling as well as confirmation of record revenue and profit. The chairman has reduced his shareholding from 19% to 15%, and confirmed he is looking to sell more during the next few years. The marquee presentation did not provide any great revelations, but one slide did show a useful sales comparison between the UK and overseas, while another slide suggested full-year sales of the group’s ‘core’ disinfectants had just advanced an impressive 18%. I continue to hold.
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.
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.
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.
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.
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.
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.
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.
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.
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.
16 March 2018
By Maynard Paton
Update on FW Thorpe (TFW).
Event: Interim results for the six months to 31 December 2017 published 15 March 2018
Summary: These first-half figures actually set new H1 records, but they also confirmed TFW’s good run of double-digit profit growth will pause during 2018. Pressure on prices for tunnel lighting was cited as one reason for the pedestrian performance. Should revenue and profit continue to plateau, the elevated share price — rated at 22x my earnings guess — may be at risk of a de-rating. Still, the lighting specialist remains a very respectable business, and continues to be led by directors that think long term. I continue to hold.
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 has 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.
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.