Andrews Sykes: Milder Winter Leaves H1 Profit Down 25% Although Margins Remain High, Cash Exceeds Debt And Current Trading Signals A Better H2

02 December 2019
By Maynard Paton

Results summary for Andrews Sykes (ASY):

  • Revenue dropped 8% and operating profit dived 25% following lower demand for ASY’s heaters and boilers.
  • European operations continue to represent almost a quarter of the business, with new depots opened recently in France.
  • Accounts now affected by IFRS 16, although the fundamental attractions of decent margins (19%) and net cash (£20m) remain in place. 
  • Outlook comments appeared encouraging, with the company blog suggesting busy demand for pumps to combat flooding.
  • The underlying P/E could be 16 and the yield is 3.9%. I continue to hold.

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Getech: H1 Results Reiterating ‘Lumpy’ Revenue, Fragile Accounts And Other Drawbacks Prompt My Exit At A 47% Loss

02 December 2019
By Maynard Paton

Results summary for Getech (GTC):

  • Revenue fell 15% to its lowest first-half level since 2010. At least the H1 operating loss did not increase from H1 2018.
  • GTC continues to be dependent on oil and gas operators purchasing its “market leading” data — the income from which remains “lumpy”. 
  • The level of recurring revenue implies a lot of work is needed before GTC can sustain positive earnings.  
  • The accounts are still rather fragile, with cash flow shored up by tax credits and capitalised development costs becoming more significant.  
  • Delays to both a Sierra Leone project and a property sale have not helped support the £9m market cap. I have sold out entirely.

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

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20 November 2019
By Maynard Paton

Today I have revisited a share screen that applies two ratios favoured by ‘quality’ investors — operating margin and return on equity (ROE).

The exact criteria I re-used were:

1) An operating margin (latest and 10-year average) of 20% or more, and; 
2) An ROE (latest and 10-year average) of 20% or more.

This time I have pinpointed Dotdigital, a £265 million software business that is blessed with a 30% operating margin and a 30% ROE.

Read my full Dotdigital article for SharePad.

Maynard Paton

S & U: Record H1 Figures Show Profit Up Only 3%, Although Welcome News On Bad Debts Now Signals A ‘Resumption’ Of Growth

19 November 2019
By Maynard Paton

Results summary for S & U (SUS):

  • Record first-half figures that showed revenue up 7%, operating profit up 3% and the dividend up 6%.
  • Bad debts within the Advantage car-loan division have started to subside following 18 months of sharp increases.
  • Management remains upbeat as loan applications continue to flood in, and has appointed an industry ‘heavyweight’ as the new Advantage MD.
  • Progress at Aspen Bridging was “slightly short of expectations” but the division’s long-term potential could be considerable. 
  • Possible P/E of 11 and yield of 5.8% do not appear expensive if indeed the business can enjoy “a resumption of [its] usual rates of growth”. I continue to hold.

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Tasty: Woeful H1 Results Leave Shareholders Relying On Bumper Christmas Bookings To Avert Terminal Cash Trauma

07 November 2019
By Maynard Paton

Results summary for Tasty (TAST):

  • Woeful figures showed weaker revenue and greater losses — with the excuses this time including Brexit rather than unfavourable weather and the World Cup.
  • A £3m equity placing has shored up the balance sheet, while an absence of further write-offs and utilised provisions lends support to turnaround hopes. 
  • This year’s Christmas performance is crucial, with TAST going all out to capture festive-party bookings. Management’s outlook remarks seemed encouraging.
  • Poor Christmas trade causing further cash flow traumas could leave TAST no option but to de-list.  
  • The market cap is £4.1m for sales of £45m from 57 restaurants. I continue to bravely/stupidly hold.

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[Event] Could You Do Me This Quick Favour?

28 October 2019
By Maynard Paton

Could you do me this quick favour?

I am taking part in a charity ‘kickathon’ this weekend (2nd and 3rd November), raising money for three good causes.

If you have ever enjoyed my free blog, then now is your chance to show your appreciation and make a donation :-)

This link gives full details of the event. Essentially a group of us martial-arts students are aiming to perform 200,000 kicks over two days. I will be happy with 10,000 kicks and the ability to walk afterwards!

All contributions will be gratefully received. Simply click on this link to donate.

Many thanks.

Maynard Paton

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

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25 October 2019
By Maynard Paton

Studying free cash conversion is vital when evaluating a set of accounts.

The measure compares free cash flow to reported earnings, and can indicate whether a business is a ‘cash fountain’ or a ‘cash guzzler’.

Ideally we want to own companies that generate plenty of spare cash, because such cash can:

  • Underpin accounting profits;
  • Indicate an attractive business, and;
  • Fund welcome dividends.

By employing SharePad, I identified Rightmove as an elite cash producer.

Read my full Rightmove article for SharePad.

Maynard Paton

FW Thorpe: 2019 Results Declare Record £57m Cash Hoard Despite Slowing LED Sales And Brexit Reducing Profit By 10%

18 October 2019
By Maynard Paton

Results summary for FW Thorpe (TFW):

  • “Ongoing economic uncertainty” caused by Brexit led to flat sales and lower profit. 
  • Talk of a “healthy order book” provides hope that trading won’t deteriorate into 2020. 
  • Comments concerning new products imply slowing LED growth and a plucky move into non-lighting applications.
  • Accounts boast enormous £57m cash hoard that could be used for acquisitions — or (fingers crossed) further special dividends.
  • Underlying P/E of 19 seems optimistic given recent progress. I continue to hold.

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Q3 2019: 1 Top-Up, 3 AGMs And Obscure But Important Annual Report Small-Print

01 October 2019
By Maynard Paton

Happy Tuesday! I hope you continue to find my Blog useful… and that your shares are coping well in the current market.

My portfolio continues to lag the FTSE 100. Since the start of the year, I am up a measly 3.6% while the index with dividends reinvested is up 14.3%.

I remain on the wrong side of what has become a two-tier market. While global ‘quality’ large-caps continue to charge higher, my portfolio is still full of smaller UK companies…

…many of which are undergoing potential recoveries (e.g. Getech, Tasty), experiencing standstill earnings (e.g. FW Thorpe, M Winkworth) or operating in an unloved sector (e.g. Daejan, Mountview Estates).

Read more

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

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30 September 2019
By Maynard Paton

Dynamic growth shares are among the market’s most exciting investments.

Find a business that has expanded rapidly and offers the prospect of further earnings growth — but also has an overlooked share price — and you could be on to a winner.

Medica — an AIM-traded supplier of radiology reports to hospitals — could be one such opportunity. The company’s forecast P/E of 15 appears modest given the 300%-plus earnings growth seen during the previous five years.

Read my full Medica article for SharePad.

Maynard Paton

M Winkworth: Subdued H1 Results Leave P/E At 10x As Foxtons Beaten Once Again In Brexit-Stifled Market

23 September 2019
By Maynard Paton

Results summary for M Winkworth (WINK):

  • A standstill London property market left first-half revenue down 3% and profit unchanged. 
  • Subdued trading conditions have persisted since the Brexit vote and are likely to continue until the “political and economic uncertainty” clears. 
  • Further market-share gains have been won from London rival Foxtons, while the online competition continues to struggle.
  • The accounts remain simple, high-margin and cash-flush.
  • A possible P/E of 10 and yield of 6.6% do not appear expensive should earnings ever resume their momentum. I continue to hold.

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

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04 September 2019
By Maynard Paton

Buying a share at a discount to its book (or net asset) value ought to be the safest way of investing.

Indeed, what could go wrong if you can effectively buy assets worth £1 per share for, say, 50p?

The reality — sadly — is not always that simple.

Let me show you what I mean by using SharePad to evaluate Hammerson, a FTSE 250 real estate investment trust with net tangible assets of £5 billion and a market cap of only £1.6 billion .

Read my full Hammerson article for SharePad.

Maynard Paton

Tristel: 2019 Open Day Yields No Revelations Although Encouraging Sales Developments Have Emerged In The UK, France And Italy

04 September 2019
By Maynard Paton

Trading update and presentation summary on Tristel (TSTL):

  • TSTL’s 2019 open-day presentation and the associated scuttlebutt did not yield any ground-breaking news. 
  • Unpicking the accompanying trading update suggested second-half UK sales gained an impressive 12%.
  • However, the contribution from international operations was distorted by the purchase of Ecomed in November.
  • The former Ecomed boss was confident sales in France could one day exceed those in Germany — TSTL’s largest overseas market. 
  • The purchase of the group’s Italian distributor — which has expanded quickly during recent years — appears very sensible. 

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Mincon: Remarkable €8m Disposal And Promising ‘Challenger’ Contracts Offset Mixed H1 Trading And 14% Profit Drop

27 August 2019
By Maynard Paton

Results summary for Mincon (MCON):

  • Mixed progress, with little underlying revenue growth and profit down 14% due to a “softening market”.
  • Earnings were bolstered by the remarkable €8m disposal of a subsidiary purchased 15 months earlier for effectively €1m.
  • New ‘challenger’ plan of selling direct to customers appears to have started well with two new contracts won.
  • Financials could be improved after accounts show modest margins, notable write-offs and significant working-capital investment.
  • The underlying P/E of 20 is not a bargain. I continue to hold.

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Daejan: NAV Reaches New £119 Per Share High But Management Remarks Of Slowing Growth Now Leaves Price-To-Book At 46%

14 August 2019
By Maynard Paton

Results summary for Daejan (DJAN):

  • These full-year figures set new records for revenue, up 9%, net asset value, up 7% and the dividend, up 3%.
  • The 3.5% valuation gain was DJAN’s lowest since 2012 following the “uncertainty” caused by Brexit. Management remarks suggested current-year growth could slow further.
  • A significant purchase in the States has lifted the proportion of US properties to 29% of the group’s estate.
  • The accounts remain conservatively financed and the property valuations continue to appear prudent.
  • The share price represents only 46% of net asset value — the lowest percentage for seven years. I continue to hold.

Read more

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