M WINKWORTH: ‘New Blood’ Sought To 3-4x Revenue At Certain London Branches After ‘Challenging’ Market Reduces H1 2023 Profit By 26% And Leaves ‘Progressive’ Dividend Yielding 6.9%

31 March 2024
By Maynard Paton

H1 2023 results summary for M Winkworth (WINK):

  • Only the dividend advanced higher (+7%) after a “more challenging” property market alongside greater costs caused franchisee network income to decline 5%, revenue to remain flat and profit to drop 26%. 
  • WINK’s franchisees continue to report greater SSTCs and exchanges versus other agents, with sales commissions improving to an estimated £5.4k per transaction and “new blood” being sought to 3-4x franchise revenue at certain London branches. 
  • A third company-owned office seems on the horizon, although the departure of WINK’s successful Tooting manager plus unclear financial progress at Crystal Palace do raise questions about the in-house approach.  
  • A lower margin and adverse cash generation reflected this H1’s reduced sales activity, but a post-H1 update indicated a stronger H2 2023 that ought to include greater returns from franchisee loans. 
  • Projected earnings of c12p per share may limit increases to the 11.7p per share dividend, although net cash of £4m alongside owner-directors committed to a “progressive” payout should sustain the 6.9% yield. I continue to hold.

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[SharePad] Small-Cap Spotlight Report: ROCKWOOD STRATEGIC

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24 March 2024
By Maynard Paton

Rockwood Strategic could be the ideal choice for anyone wishing to capitalise on the sorry state of UK small-caps.

A check of your own portfolio may support Rockwood’s belief that numerous UK small-caps are ready to be revitalised by fresh management and then be sold to the highest bidder.

You may not be able to appoint new board executives and argue for takeovers, but this £60 million ‘activist’ investment trust can do so on your behalf and has a 125% return to prove it:

(Source: SharePad)

Let’s take a closer look.

Read my full ROCKWOOD STRATEGIC article for SharePad >>

Maynard Paton

S & U: Record H1 2024 Overshadowed By Subsequent 8% Dividend Cut As Economic ‘Headwinds’, Greater Regulation And Higher Debt Costs Leave £18 Shares Valued Below 1x NAV

24 March 2024
By Maynard Paton

H1 2024 results summary for S & U (SUS):

  • A record H1, during which larger loan sizes and lower-than-normal bad debts offset higher interest costs and pushed net asset value (NAV) to a fresh £18.86 per share high.
  • This H1 was then overshadowed by February’s trading update, which revealed H2 motor-loan collections alarmingly reduced from 94% to 90%, extra Q4 write-offs of approximately £5m and the second-interim dividend cut by 8%.
  • Greater FCA regulation, including the new Consumer Duty regime, is prompting SUS to revise its motor-finance lending and seems likely to lead to inherently lower margins, reduced transactions and higher regulatory-admin expenses.
  • Net finance costs absorbed a significant 12% of H1 revenue, with post-H1 debt increasing to £224m — equivalent possibly to 100% gearing — and borrowing rates perhaps now at 8%.
  • Tighter regulation, greater debt expense plus various economic “headwinds” leave the £18 shares at 2014 levels and below 1x NAV, a valuation that has occurred only occasionally during the last 30 years. I continue to hold.

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

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29 February 2024
By Maynard Paton

Today I am studying Property Franchise, an estate-agency franchising business that appeared on my radar after I reviewed fellow estate-agency franchisor Belvoir last year.

To recap, I finished my Belvoir write-up by suggesting Property Franchise might have been the better sector opportunity:

“The outperformance of Property Franchise following Belvoir’s [unsuccessful bid] approach could in fact mean Property Franchise is the better business of the two. Just like Belvoir, Property Franchise claims to be the country’s largest property franchisor and, funnily enough, was also among the 21 matches from this SharePad screen…

I feel a review of Property Franchise is required to give greater shareholder perspective and to perhaps highlight a more attractive sector opportunity.“

Determining whether Property Franchise or Belvoir is the better sector opportunity has now become academic because the two companies recently agreed to merge.

According to my SharePad filtering, the Property Franchise/Belvoir combination should be an attractive operator. Both Property Franchise and Belvoir continue to appear on my SharePad screen that seeks companies exhibiting:

  • An operating margin (latest and 10-year average) of 20% or more, and;
  • A return on equity (latest and 10-year average) of 20% or more.
(Source: SharePad)

Businesses blessed with a consistent margin and return on equity of at least 20% are probably quite special.

Let’s take a closer look at Property Franchise and the Belvoir merger.

Read my full PROPERTY FRANCHISE article for SharePad >>

Maynard Paton

BIOVENTIX: End Of 7-Year Special-Dividend Run After Record FY 2023 Spotlights Encouraging Alzheimer’s P-tau217 R&D And Leaves £50 Shares Trading At 31x P/E

27 February 2024
By Maynard Paton

FY 2023 results summary for Bioventix (BVXP):

  • A record FY, with revenue up 9% and profit up 8% albeit split between a post-pandemic H1 rebound followed by a standstill H2.
  • Sales efforts were supported by best-seller vitamin D (+7%) and second-best-seller troponin (+30%), although the latter may not be too far away from reaching ‘peak’ revenue. 
  • Significant long-term progress continues to rest upon R&D success with the University of Gothenburg, which has published encouraging lab results using BVXP’s antibodies to identify early-stage Alzheimer’s through p-tau217.
  • While revenue per employee at a super £801k and minuscule £11k capex continue to underpin amazing cash generation, the total dividend was unchanged at 152p per share, dividend cover has reduced to almost 1x and the seven-year run of special payouts has now ended.
  • The £50 shares trade at a premium 31x P/E and reflect understandable Alzheimer’s optimism alongside the general revenue longevity and terrific economics of successful antibodies. I continue to hold.

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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

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