FW THORPE: Record FY 2023 Delivers 21st Consecutive Annual Dividend Increase, Suggests SchahlLED Acquired At 5x Ebitda And Justifies £35m Cash Reserve To ‘Some Shareholders’

11 February 2024
By Maynard Paton

FY 2023 results summary for FW Thorpe (TFW):

  • A record FY performance bolstered by acquisitions that showed total revenue up 23%, adjusted profit up 16% and the ordinary dividend lifted for the 21st consecutive year.
  • Largest division Thorlux continued to fare well, expanding by almost 30% helped by SchahlLED acquired at a possible 5x Ebitda.  
  • Mixed progress was experienced elsewhere, with Dutch profit down 8%, Zemper yet to show its full potential and the EV-charging joint venture going from profit to loss.
  • Despite acquisition payments of £19m, very respectable cash conversion left cash only £6m lower at a very useful £35m — a figure that required justification to ‘some shareholders’. 
  • A possible 20x P/E seemingly reflects TFW’s distinguished operating history and the persistent demand for energy-saving lighting rather than doubts about the significant acquisition expense and near-term prospect of subdued trading. I continue to hold.

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MINCON: Prospect Of H2 Profit Dropping 45% Overshadows Underwhelming H1 2023 And Heightens Concerns About Debt Covenants, Dividend Payments And Boardroom Strategy

01 February 2024
By Maynard Paton

H1 2023 results summary for Mincon (MCON):

  • An underwhelming H1 performance caused by reduced mining-customer activity, with revenue down 5%, profit down 12% and an unchanged dividend paid more than two months later than normal.
  • This H1 was overshadowed by October’s Q3 update, which warned of weaker sales, lower margins, exceptional costs and H2 Ebitda dropping 45%.
  • The Q3 update — and possibility of a difficult FY 2024 — heightened concerns about the group’s debt covenants, capital-intensive growth strategy, dividend payments and boardroom personnel.
  • Hopes of improved financials seem to rest upon a mining-customer revival, further geothermal installations plus R&D projects such as Greenhammer and subsea micropiling becoming commercial successes.
  • The shares currently trade below their 2013 flotation price and leave minority investors trusting the 56% family owners take the necessary action to safeguard the business. I continue to hold.

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[SharePad] Small-Cap Spotlight Report: SOSANDAR

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27 January 2024
By Maynard Paton

Fashion website Sosandar provides a fascinating dilemma for small-cap growth investors.

Bulls will highlight the online retailer’s very rapid expansion and bold ambition to raise profits to £10 million which, if achieved, would make its £37 million market cap extremely attractive. The story is also backed by keen co-founders and net cash.

Bears will note the £10 million profit ambition is based upon creating a chain of shops alongside continuing to sell clothes online. Sosandar’s website currently makes little profit and the fashion industry — whether selling online or through shops — is blighted by poor economics.

Let’s take a closer look.

Read my full SOSANDAR article for SharePad >>

Maynard Paton

TRISTEL: Positive FY 2023 Reveals Revenue Up 22%, New 5%-Plus Dividend-Growth Policy And Mooted 38p Royalty Per US Ultrasound Disinfection  

14 January 2024
By Maynard Paton

FY 2023 results summary for Tristel (TSTL):

  • A positive post-pandemic performance, with strong overseas progress helping FY ‘continuing’ revenue gain 22% and FY profit rebound up to 28% albeit after a bevy of adjustments.
  • The FY highlight was a doubling of the final dividend backed by a welcome new policy to increase the ordinary payout by at least 5% a year.
  • TSTL revealed ultrasound-probe decontamination supported 33% of group sales and implied a potential 38p royalty per ultrasound disinfection within the United States. 
  • The accounts showed a record 81% gross margin and net cash recently topping £14m, although restatements continue to occur and audit fees appear unusually steep.
  • An estimated 22x P/E for FY 2028 is not an obvious bargain, but a premium rating could be justified by further meaningful growth, lucrative US royalties and the prospect of fresh leadership. I continue to hold.

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Q4 2023: Up 15.3% For 2023

02 January 2024
By Maynard Paton

Happy 2024! I hope your shares prospered last year and you continue to find my blog useful.

A summary of my portfolio’s 2023:

  • Total return of +15.3% (Q4: +5.4%)*;
  • Individual returns ranged from up 115% for System1 to down 50% for Tasty;
  • One share was topped-up: City of London Investment;
  • One share was sold: Tasty, and;
  • No new shares were purchased and no shares were top-sliced.

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

I publish a portfolio review after every quarter (Q1, Q2 and Q3), and this post recaps my October/November/December activity as well as my 2023 performance.

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My Portfolio: Year In Review 2023

02 January 2024
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 4,833-word post provides a ‘year in review’ of my current holdings. I recap how each business performed during 2023 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 2024 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, 2022 and 2023.

My portfolio gained 15.3% during 2023. This other post explains that performance in more detail and clarifies how my portfolio begins 2024.

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CITY OF LONDON INVESTMENT: George Karpus Explains AGM Protest Votes, Absence Of New Clients And ‘Tremendous Opportunities’ For Corporate Cash Management

19 December 2023
By Maynard Paton

AGM summary for City of London Investment (CLIG):

  • CLIG’s largest shareholder George Karpus voted against the group’s non-execs at the AGM and declared “this board should be replaced with a seasoned group of directors that understand the enormous potential of CLIG“.
  • My subsequent conversation with Mr Karpus revealed a somewhat alarming lack of board action following reduced funds under management, dwindling fee rates and a dividend he believes may become “questionable“.
  • “They are not client driven” was how Mr Karpus summarised the absence of significant new mandates. Greater cross-selling between group divisions CLIM and KIM was still required, too.
  • Mr Karpus explained how a corporate cash-management service could lead to “tremendous opportunities” that might add an extra £1b-plus to CLIG’s funds under management during the next five years.
  • Mr Karpus also expressed frank views about the group’s approach to corporate governance, its use of consultants, the over-exposure to Russian shares and employees still working from home.

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[SharePad] Screening For My Next Long-Term Winner: LOK’NSTORE

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16 December 2023
By Maynard Paton

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

Such leaders do seem to act differently to standard chief executives. A hefty investment complemented by substantial dividends should certainly focus the mind on long-term operational matters…

…versus more typical executive considerations such as bonuses, expense accounts, awaydays and career progression.

I have attempted to identify promising ‘owner managers’ by screening for companies with the following criteria:

  • At least ten years of annual dividend increases, and;
  • A minimum 10% total director shareholding.

SharePad returned only eight companies, including James Halstead, Judges Scientific and Craneware:

(Source: SharePad)

I selected Lok’nStore as it offered the highest forecast dividend growth among the shares I had not previously evaluated for SharePad.

Lok’nStore’s history of annual dividend increases runs to 13 years, with another three years of payout advances predicted:

(Source: SharePad)

SharePad reveals Lok’nStore’s ‘owner manager’ to be executive chairman Andrew Jacobs, who controls 13% of the business:

(Source: SharePad)

Let’s take a closer look.

Read my full LOK’NSTORE article for SharePad >>

Maynard Paton

CITY OF LONDON INVESTMENT: Profit Share Rising To 26% While FY 2023 Revenue Slides 16% Raises Further Questions About Employee Pay,  Future Margins And Viability Of 10% Dividend Yield

15 December 2023
By Maynard Paton

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

  • Ongoing market “headwinds” caused average funds under management (FuM) to decline 12% to $9.2b, which led to revenue dropping 16% and profit diving 29%.
  • New USD reporting may expose CLIG’s prior progress benefitting from a weaker GBP, with the GBP dividend unchanged since FY 2021 versus the USD equivalent down 11%.
  • Significant new clients remain very elusive, with FuM outflows of $357m during this FY prompted by higher deposits rates and CLIM funds returning 3% (or less) five-year CAGRs.
  • The profit-share proportion increasing from 24% to 26% during a difficult FY raises further questions about employee pay and the likelihood of additional pressure on profit margins, earnings and ultimately the dividend. 
  • While CLIG’s own projections point to earnings of 34p per share that just about support the 33p payout and 10% yield, achieving the group’s total-return KPI to FY 2024 is looking increasingly uncertain. I continue to hold.

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[SharePad] Small-Cap Spotlight Report: JUDGES SCIENTIFIC

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18 November 2023
By Maynard Paton

Today’s rough market for small-cap shares could be the exact time to hunt for your next great portfolio winner.

Take Judges Scientific, the £540 million group of scientific instrument manufacturers, which joined AIM at 95p at the bottom of the dotcom crash during early 2003:

(Source: SharePad)

These shares topped £100 earlier this year to give initial shareholders a staggering 100-bagger return. What can investors learn from this astonishing performer?

Let’s take a closer look.

Read my full JUDGES SCIENTIFIC article for SharePad >>

Maynard Paton

MOUNTVIEW ESTATES: Lowly 50% FY Gross Margin Despite Record £395k Average Sales Price Signals Property Purchases Realising Limited Gains And Leaves £100 Shares Trading At NAV 

28 October 2023
By Maynard Paton

FY 2023 results summary for Mountview Estates (MTVW):

  • A lacklustre FY performance, with profit down 2% to the lowest level for ten years despite average property sales (excluding ground rents) rising 14% to a record £395k.
  • Property sales achieving a 50% gross margin, the worst for 14 years, suggest properties purchased following a 2014 valuation have realised very limited premiums on disposal.   
  • Debt remains under control at 12% of the property estate, although £56m was spent on new properties — the largest amount since FY 2008 — despite management talk of ongoing “difficult economic circumstances“.
  • Protest votes against the board’s composition and remuneration continue to increase, with property investor David Pears among the unhappy shareholders asking questions at the latest AGM.
  • The £100 shares trade at net asset value (NAV), which in theory prices in no future property gains, and offers a 5% income, the highest for decades aside from the banking crash. I continue to hold.

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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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