My Shares

[Podcast] OCEAN WILSONS, TRISTEL And ARCONTECH With Roland Head, Mark Simpson, Bruce Packard And Maynard Paton

11 July 2023
By Maynard Paton

I have recorded another episode of The Investor’s Roundtable podcast with fellow investors and good friends Roland Head, Mark Simpson and Bruce Packard:

MAYNARD
PATON

ROLAND
HEAD

MARK
SIMPSON

BRUCE
PACKARD

We talked about Bruce’s investment in shipping and investment group Ocean Wilsons (OCN), my investment in disinfectant specialist Tristel (TSTL) and Mark’s investment in software developer Arcontech (ARC). We also discussed whether private investors should consider asset allocation within their portfolios:

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CITY OF LONDON INVESTMENT: Possible 34p EPS Just About Supports 33p Per Share Dividend And 7.8% Yield After H1 2023 FuM Slides 18% And Q3 Update Admits Client Fees Cut To 71 Basis Points

01 July 2023
By Maynard Paton

H1 2023 results summary for City of London Investment (CLIG):

  • “Choppy” market conditions causing funds under management (FuM) to slide 18% to $9b led to revenue dropping 9% and profit diving 26%.
  • Significant new clients remain very elusive, with H1 outflows of $107m negating the inflows enjoyed during FY 2022 and aggregate withdrawals reaching $404m at merger partner KIM.
  • Rising staff costs represented 42% of revenue following a 24% profit share, and questions remain as to whether i) employees rank ahead of shareholders, and ii) the total-return KPI really stretches management.
  • The follow-up Q3 update admitted fee rates had declined from 73 to 71 basis points, as clients seemingly chip away at charges after perhaps watching the cheaper S&P 500 continue to outrun their CLIG portfolios.
  • Reduced FuM, lower fees and greater expenses now point to earnings of 34p per share that just about support the 33p dividend and 7.8% yield. Capital gains meanwhile look dependent entirely on a broad market recovery. I continue to hold.

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MINCON: FY Profit Hits Record €20m As Stock Level Balloons To €77m, Free Cash Flow Squeezed To €2m And Greenhammer Lifespan Set To 15 Years

24 June 2023
By Maynard Paton

FY 2022 results summary for Mincon (MCON):

  • A positive performance buoyed by healthy post-pandemic orders, showing revenue up 18% (to €170m) and profit up 9% (to €20m) to set new FY records.
  • Bumper construction income, greater direct sales and increased US revenue counterbalanced weaker mining activity in Europe and Australia.
  • Rig problems have beset early revenue from the “transformational” Greenhammer system, which management now believes has a 15-year useful life.
  • A €14m working-capital investment pushed stock levels to a huge €77m, squeezed free cash flow to only €2m and raised questions about the debt-funded dividend.
  • MCON’s “superior technical and innovative technology” is still to translate into superior financials, with obvious evidence of smart capital-allocation decisions remaining elusive. I continue to hold.

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TASTY: Formal Blog Coverage Ceased After Woeful £2m FY 2022 Loss Exposes Flawed Cost Structure And Suggests Wildwood Format Is Now Broken

30 May 2023
By Maynard Paton

FY 2022 results summary for Tasty (TAST):

  • A woeful H2 performance delivered a full-year £2m loss following a trio of Christmas-trading “impediments” combined with “unprecedented inflationary costs“.
  • Rising staff wages, stagnant revenue per employee, a return to pre-pandemic rents and a debatable depreciation policy do not suggest TAST’s cost structure will improve any time soon.
  • Comparisons with Restaurant Group and Fulham Shore suggest TAST’s menus are in fact inherently flawed and confirm a radical business overhaul was needed during the pandemic. 
  • The departure of an experienced industry manager after only a year as a TAST executive may well indicate the main Wildwood restaurant format is broken.
  • TAST now looks a lost cause with a de-listing a possibility. I continue to hold with vague hopes of a recovery, although formal blog coverage has ceased.

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TASTY: H1 2022 Shows Encouraging £797k Sales Per Restaurant But Higher Costs Reduce Profit To Breakeven And Curtail Plans For 5-6 New Outlets

30 May 2023
By Maynard Paton

H1 2022 results summary for Tasty (TAST):

  • The absence of pandemic restrictions ensured H1 sales returned to pre-Covid levels, with sales per restaurant of £797k encouragingly at their best H1 level since H1 2016.
  • A “steep rise in inflation in relation to wages, utilities and input supplier costs” limited underlying profit to just £0.2m and will “inevitably impact” the H2 performance.
  • Pandemic-prompted rent reductions seem to have run their course, with annual lease costs appearing to return to £5m and total lease obligations staying at £52m.
  • Management curtailing plans to open 5-6 new restaurants was disappointing but understandable given the “prevailing economic uncertainties“.
  • Can TAST ever achieve a worthwhile margin from revenue now running at almost £45m? No evidence has emerged that TAST’s restaurant formats can easily pass on, reduce or absorb much higher costs. I continue to hold.

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MOUNTVIEW ESTATES: £115 Shares Trade At Lowly 13% Premium To NAV Despite Positive H1 2023 Revealing Sold Property Prices Gaining 19% And Welcome £10m Special Dividend

16 May 2023
By Maynard Paton

Results summary for Mountview Estates (MTVW):

  • A positive H1 2023 performance, with revenue up 21% and profit up 17% due to property selling prices gaining 19% and a greater number of properties sold. 
  • A significant £26m spent on new properties implies buying opportunities are emerging as “difficult times” and “economic storms” are forecast.
  • A 54% sales premium was realised against the 2014 Allsop valuation, and the remaining Allsop-valued properties now represent less than half of the property estate. 
  • Net debt remains very modest at just 6% of the property estate and allowed the welcome declaration of a 250p per share/£10m special dividend. 
  • The £115 shares trade at a lowly 13% premium to net asset value, which inched higher to a fresh £102 per share high, although the balance sheet could one day still be worth £200 per share. I continue to hold.

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ANDREWS SYKES: 90% Family Ownership May Explain 4.7% Yield After Satisfactory H1 2022 Reveals European Revenue Up 17%, £34m Net Cash And Welcome £7m Special Dividend

30 April 2023
By Maynard Paton

Results summary for Andrews Sykes (ASY):

  • A satisfactory performance, with H1 revenue reaching a new £38m high, H1 profit gaining 8% and the welcome declaration of a £7m special dividend.
  • Assisted by strong Italian progress, European revenue climbed 17% to represent 27% — a record proportion — of the total top line.
  • A healthy 22% margin and favourable cash conversion lifting net cash to £34m left the accounts in good shape. 
  • A bombshell delisting on AIM brings greater attention to ASY’s 90% family ownership and the associated ‘relationship agreement’ small-print.
  • The 10% free float may explain why the shares yield a useful 4.7% despite the robust financials, upbeat company-blog commentary and potential further European expansion. I continue to hold.

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SYSTEM1: Proposed Board Changes Still Have My Support After Stefan Barden Explains Data-Platform Sales Focus, 5-Bagger Exit Ambition And ‘Now Or Never’ Vote Decision

07 April 2023
By Maynard Paton

Notice of general meeting summary for System1 (SYS1):

  • Confirmation of a vote on 21 April to i) appoint former director Stefan Barden as executive chairman; ii) demote founder John Kearon from executive to non-executive, and; iii) retire two non-executives.
  • Data and Data-led revenue advancing 33% during FY 2023 and 50%-plus during Q4 2023 suggests SYS1’s mooted 25% growth target is achievable.
  • My conversation with Mr Barden revealed his data-platform sales focus, plans for a £100m-plus exit and the reasoning behind SYS1’s $1 billion market-cap ambition.
  • SYS1’s proposed new US advisory team emphasised Mr Kearon’s advert-creative sales approach, which I now believe explains the group’s lowly revenue and lack of profit.  
  • Shareholders have, according to Mr Barden, a “now or never” decision to support SYS1 becoming the “definitive” marketing-data platform with a potential 5-bagger outcome. I still support the proposed board changes and continue to hold.

UPDATE 17 April 2023: Following the publication of this blog post, Stefan Barden/James Geddes and SYS1 have referred to its contents within this RNS announcement issued on 13 April 2023. Mr Barden has since provided a further statement that is now published at the end of this blog post.

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S & U: Record H1 2023 Prompts Management To Cite Broker’s £33 Price Target As £22 Shares Trade At Possible 1.2x NAV And Yield 6%

24 March 2023
By Maynard Paton

Results summary for S & U (SUS):

  • A seemingly lower-than-normal bad-debt charge underpinned a record H1 performance, which in turn supported fresh highs for net asset value (NAV) and the dividend.
  • Mixed signals remain at the primary motor-finance division, with encouraging collection rates offset by lingering pandemic-related provisions and talk of “choppy waters ahead” testing “policies and procedures“.
  • Bumper progress at the property-loan operation heralded the subsidiary declaring its maiden dividend and another divisional executive appointed to the board.  
  • Debt remains under control at 42% of customer loans, although admin and other costs have reached their highest combined proportion of revenue since at least FY 2016.  
  • Management’s webinar commentary cited a broker’s £33 price target, with subsequent RNSs suggesting the £22 shares are not expensive at a potential 1.17x NAV with a 6% income. I continue to hold.

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SYSTEM1: Proposed Board Changes Have My Support After H1 2023 Cash Outflow Of £2m, Underwhelming Strategic Review And Frustrating Management Q&A

09 March 2023
By Maynard Paton

Results summary for System1 (SYS1):

  • H1 2023 revenue falling 15% to FY 2012 levels and underlying cash losses running at £2m-plus raised further doubts about SYS1’s services, marketing, pricing and expenditure.
  • Despite encompassing “all strategic options” and the board’s composition, a three-month strategic review simply “validated” SYS1’s existing plans with a greater focus on the United States. 
  • A management presentation revealed the transition to automated Data services still requires old-style consultancy work, and overlooked questions about partnerships, cash flow and expenses.
  • The unsatisfactory H1, underwhelming strategic review and frustrating Q&A were thankfully followed by two former executives proposing very welcome board changes.
  • Fresh executive leadership seems needed to maximise SYS1’s “superb, proven suite of products” and re-establish worthwhile levels of profit. I support the proposed board changes and continue to hold.

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MINCON: First Greenhammer Contract Heralds ‘Transformational Potential’ As H1 2022 Reveals Profit Up 18% Following 55% Construction Sales Surge

21 February 2023
By Maynard Paton

Results summary for Mincon (MCON):

  • A very satisfactory performance buoyed by healthy post-pandemic orders, showing revenue up 27% and profit up 18% to set new H1 records.
  • Positive progress was reported throughout the group, with construction-related sales up 55% helped by greater demand for specialist drilling.
  • The long-awaited Greenhammer system has won its first commercial contract and now offers “transformational potential” to MCON and the mining industry. 
  • Greenhammer and other new developments may hopefully improve MCON’s financials, given the group’s modest margin, significant stock level, net debt and poor cash conversion.
  • The shares do not appear outrageously expensive on a possible 16x P/E, although the group’s expansion led by the dominant family owners has yet to deliver superior returns to outsiders. I continue to hold.

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FW THORPE: FY 2022 Celebrates 20th Consecutive Annual Dividend Increase After Profit Up 29%, SmartScan Sales Up 49% And Encouraging Start Within EV-Charging Market

01 February 2023
By Maynard Paton

Results summary for FW Thorpe (TFW):

  • A record FY outcome (profit +29%) bolstered by the acquisition of Spanish firm Zemper that supported TFW’s 20th consecutive annual dividend increase.
  • Progress at Thorlux was supported by impressive SmartScan sales (+49%), with the innovative lighting system reducing running costs for customers by as much as 62%.
  • A positive Dutch performance has led to a reassuring non-exec appointment and an encouraging start within the electric-vehicle charging market.
  • Net cash of £39m may arguably be only £9m following the subsequent purchase of TFW’s largest customer plus the eventual earn-out for Zemper.
  • A possible 24x P/E seemingly reflects TFW’s healthy order book, savvy acquisition approach, distinguished operating history and growth opportunities beyond the UK and lighting. I continue to hold.

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TRISTEL: Pandemic-Disrupted FY 2022 Reiterates Reassuring 10-15%/Year Sales-Growth Ambition As US Regulatory Approval Now Relies Upon FDA ‘Negotiation’ Over Product Batches

12 January 2023
By Maynard Paton

Results summary for Tristel (TSTL):

  • Another pandemic-disrupted performance, although 10-15% per annum sales-growth guidance suggests hospital customers will soon resume normal purchasing activity.
  • Progress was complicated by an accounting U-turn, with Brexit stock-piling, share options, US costs and write-offs creating a wide range of profit outcomes.
  • Management webinar comments suggested a positive US regulatory verdict is dependent on a “negotiation” with the FDA concerning data tests using different product batches. 
  • A useful 17% operating margin, net cash of £10m, worthwhile cash conversion and low capital requirements imply the group’s disinfectants still enjoy favourable economics. 
  • An estimated 24x P/E for FY 2025 is not an obvious bargain, but a premium rating may be justified by a US product approval and hefty royalties appearing soon thereafter. I continue to hold.

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My Portfolio: Year In Review 2022

01 January 2023
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 4,680-word post provides a ‘year in review’ of my current holdings. I recap how each business performed during 2022 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 2023 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 and 2022.

My portfolio lost 23.3% during 2022. This other post explains that performance in more detail and clarifies how my portfolio begins 2023.

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