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

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14 October 2023
By Maynard Paton

Whisper it, but a few UK small-caps are still progressing well and maintaining resilient share prices in this difficult market.

Fonix Mobile is a good example. Recent full-year results from this £206 million business showed revenue up 21%, earnings up 10% and the dividend up 12%, which ensured the shares remain within touching distance of their all-time high:

(Source: SharePad)

Fonix currently appears on an old SharePad screen of mine that seeks respectable companies that have grown without acquisition. I have always believed the very best companies are those that can expand ‘organically’ and do not rely on purchasing other businesses for higher profit.

The screen’s filter criteria are:

  • Positive five-year turnover and operating profit growth;
  • A minimum of 15% for both return on equity (ROE) and operating margin;
  • Net bank borrowing of no more than zero (i.e. a net cash position), and;
  • A five-year acquisition spend of zero.
(Source: SharePad)

I selected Fonix as it had exhibited the strongest revenue growth after Alpha Group — which broke its organic-growth history by announcing an acquisition last month — and VAALCO Energy — an American oil explorer that I had no desire to review.

Let’s take a closer look at Fonix.

Read my full FONIX MOBILE article for SharePad >>

Maynard Paton

Q3 2023: Enjoying 100% Returns From Ordinary Dividends

08 October 2023
By Maynard Paton

Happy Sunday! I trust your shares are coping well during this lacklustre market.

A summary of my portfolio’s progress:

  • Q3 return: +8.0%* (FTSE 100: +2.2%).
  • Q3 trades: 1 Sell (Tasty).
  • YTD return:  +9.4%* (FTSE 100: +5.5%).
  • YTD winners/losers: 5 winners vs 6 losers.

(*Performance calculated using quoted bid prices and includes all dealing costs, withholding taxes, broker-account fees, paid dividends and cash interest)

My year-to-date performance has improved as I slowly recover from last year’s 23% drubbing. This Q3 was in fact my portfolio’s strongest three months since June, July and August 2021 (+8.7%), and I now need ‘only’ a 19% advance to revisit my all-time high of December 2021. 

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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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[SharePad] Small-Cap Spotlight Report: NCC

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22 September 2023
By Maynard Paton

“Instead of buying back shares or raising dividends, profitable companies often prefer to blow the money on foolish acquisitions. The dedicated diworsifier seeks out merchandise that is (1) overpriced, and (2) completely beyond his or her realm of understanding. This ensures that losses will be maximised.”

Market legend Peter Lynch never liked great companies that ‘diworsified’ into less appealing sectors in the quest for growth.

His book One Up On Wall Street recounted how many famous US stocks blew big money on foolish acquisitions to ensure losses were maximised during the 1980s.

Diworsification sadly remains a popular management strategy, and UK small-caps have not been immune from ambitious boardrooms undertaking low-quality acquisitions and trying to prove Mr Lynch wrong.

NCC is a prime example. The IT group was once dominated by a terrific subsidiary, but lots of acquisitions created a series of mishaps and the shares are now back to where they were twelve years ago:

(Source: SharePad)

Let’s take a closer look.

Read my full NCC article for SharePad >>

Maynard Paton

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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FW THORPE: Record H1 Shows Profit Up 34% After Supply Problems Ease Although Net Cash Declines To 16-Year Low And Shareholders Await Suitable Returns From Eventual £37m Zemper Acquisition

15 August 2023
By Maynard Paton

H1 2023 results summary for FW Thorpe (TFW):

  • A record H1 performance bolstered by acquisitions of Zemper and SchahlLED that showed total revenue up 29% and adjusted profit up 34%.
  • Thorlux and SchahlLED combined well, with adjusted Thorlux profit up 57% after supply problems eased and the launch of a new SmartScan system.
  • Mixed progress was delivered elsewhere, as Dutch profit fell 8% and Zemper not obviously living up to what could be an eventual £37m purchase price. 
  • Net cash of £18m was the lowest for 16 years and no longer covers the anticipated earn-outs for Zemper (£12m) and SchahlLED (£7m).
  • A possible 20x P/E seemingly reflects TFW’s distinguished operating history and the persistent demand for energy-saving lighting rather than any doubts about the hefty acquisition expense and the uncertain wider economy. I continue to hold.

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

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12 August 2023
By Maynard Paton

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

The exact criteria I re-used were:

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

Any business with a persistent margin and ROE of at least 20% could be very special.

To narrow the field down further, I also sought companies that carried net cash (i.e. net borrowings excluding IFRS 16 finance leases of less than zero):

(Source: SharePad)

This time the filter yielded 20 matches, including Games WorkshopHargreaves LansdownPlus 500 and Polar Capital.

I selected Record because it was among the better share-price performers of the last twelve months that I had not already studied for SharePad. Let’s take a closer look.

Read my full RECORD article for SharePad >>

Maynard Paton

M WINKWORTH: Acceptable FY 2022 Shows Ordinary Dividends Up 18% To Lift Yield To 7.6% But ‘Delayed’ Property Sales Prompt FY 2023 Warning And Reduces Possible Payout Cover Towards 1x

21 July 2023
By Maynard Paton

FY 2022 results summary for M Winkworth (WINK):

  • An acceptable FY performance that revealed ordinary dividends up 18% and remarkably took FY franchisee income close to the £64.8m exceptional level of FY 2021.
  • A subsequent trading update rather overshadowed the figures by admitting a “more challenging” housing market had “delayed” agreed sales and in turn caused current-year profit to run below expectations.
  • The “uncertain economic outlook“‘ had already reduced the proportion of franchisee commissions converted into revenue to 10% — WINK’s lowest percentage since at least 2009.  
  • Healthy rental commissions, favourable competitor comparisons, resilient company-owned branches and cash-flush accounts suggest WINK should be well prepared for any house-price downturn. 
  • Possible earnings around 12p per share may limit advances to the 11.4p per share trailing dividend, although net cash of £5m plus owner-directors who “prioritise” income should sustain the 7.6% yield. I continue to hold.

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[SharePad] Small-Cap Spotlight Report: HOTEL CHOCOLAT

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15 July 2023
By Maynard Paton

I love ‘owner managers’ — company bosses with significant shareholdings who live and breathe their business and want to build wealth for the long haul.

Typically entrepreneurs, the owner-managers who lead quoted companies do seem to think and act differently to standard chief executives.

A hefty investment complemented perhaps by substantial dividends should certainly focus the mind on fundamental business matters…

…versus more common executive considerations such as bonuses, LTIPs, adjusted earnings and career progression.

But seeking owner-managers is not a foolproof way to identify your next great multi-bagger. Hotel Chocolat provides a useful example of what can go wrong even with devoted founders in charge.

The upmarket chocolate retailer floated at 148p during 2016 and its shares reached 530p the other year…

(Source: SharePad)

…but a series of mishaps has since dragged the price down to 120p and raised questions about the board’s decisions and composition.

Let’s take a closer look.

Read my full HOTEL CHOCOLAT article for SharePad >>

Maynard Paton

Q2 2023: Are You A Good Investor?

11 July 2023
By Maynard Paton

Happy Tuesday! I trust your shares are faring well during this underwhelming time for the market. 

A summary of my portfolio’s progress:

  • Q2 return: -0.6%* (FTSE 100: -0.3%).
  • Q2 trades: None.
  • YTD return:  +1.3% (FTSE 100: +3.2%).
  • YTD winners/losers: 6 winners vs 5 losers.

(*Performance calculated using quoted bid prices and includes all dealing costs, withholding taxes, broker-account fees, paid dividends and cash interest)

My year-to-date performance has not been fantastic as I look to recover from last year’s 23% drubbing. My portfolio currently requires a 29% advance to revisit its all-time high of December 2021. 

Still, company RNSs from my portfolio were very acceptable during Q2. Dividends were held or raised and thankfully no surprise warnings emerged. As always, I am hopeful a mix of respectable competitive positions, capable managers and asset-rich balance sheets will steer my portfolio through whatever the economy has in store.

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[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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[Podcast] INTEGRAFIN With Roland Head And Maynard Paton

04 July 2023
By Maynard Paton

I have recorded another podcast with fellow investor and good friend Roland Head. This time we talked about IntegraFin, the FTSE 250 investment platform that offers many attractive qualities for long-term shareholders.

We discussed the recurring nature of the group’s revenue, the focus on serving financial advisers, the appealing-but-complicated financials and how the business compares to retail-investor platforms Hargreaves Lansdown and AJ Bell:

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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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