TRISTEL: Pandemic-Disrupted H1 2022 Reveals Product Cull And Profit Reclassification With Dividend Held And Share Price Now 50% Lower

30 April 2022
By Maynard Paton

Results summary for Tristel (TSTL):

  • An underwhelming pandemic-disrupted performance, with the dividend held for the first time since FY 2013 as hospital customers delayed resuming normal purchasing activity.
  • Progress was complicated by the understandable culling of numerous ‘non-core’ products, although the associated reclassification revealed TSTL’s surface disinfectants to be less profitable than previously declared.
  • Sector “lobbying” within the United States for EPA-approved disinfectants might have created a new “commercial opportunity” for TSTL’s DUO foam. 
  • Brexit stock-piling, share options and US costs offered a wide range of profit outcomes, but cash flow remained respectable and bolstered net cash to a useful £9m. 
  • A 50% lower share price on a possible 32x multiple is not an obvious bargain, especially if patent expiries, automated competition or single-use medical equipment cause disruption. I continue to hold.

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[SharePad] Small-Cap Spotlight Report: BEEKS FINANCIAL CLOUD

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23 April 2022
By Maynard Paton

Every share has a bull case and a bear case.

Our job as investors should be to consider the arguments from both sides, and decide which is the stronger before buying or selling.

Beeks Financial Cloud is a good example of a company with distinct pros and cons:

For the bull case, the cloud-computing specialist offers:

  • A strong competitive position in a fast-growing industry;
  • A wonderful revenue history created by recurring customer payments, and;
  • Shareholder-friendly management led by a ‘thin cat’ entrepreneur.

But for the bear case:

  • Past growth has required substantial investment and extra funding;
  • The underlying economics of the business remain unclear at best, and;
  • Plenty of future expansion is already priced into the shares.

Let’s take a closer look.

Read my full Beeks Financial Cloud article for SharePad.

Maynard Paton

Q1 2022: Surging Energy Prices And The Companies Most Vulnerable

01 April 2022
By Maynard Paton

Happy Friday! I trust your shares have performed better than mine so far this year.

A summary of my portfolio’s first quarter:

  • Q1 return: -13.2% loss* (FTSE 100: +2.9% gain).
  • Q1 trades: None.
  • Q1 winners/losers: 0 winners vs 11 losers.

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

My portfolio’s 13.2% Q1 drop is sadly my worst three-month performance since I commenced this blog at the start of 2015. My largest three-month declines prior to this year were 11% during August, September and October 2018 and 8% during January, February and March 2020.

The primary cause of my Q1 reversal was a profit warning from (by far) my largest holding, System1. Not helping matters were underwhelming results from (what was) my second-largest holding, Tristel.

The rest of my portfolio seems to have suffered from the market’s general unease towards smaller companies.

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

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25 March 2022
By Maynard Paton

The market continues to wobble and I have therefore kept with my ‘back to basics’ filtering.

Applied the other week to identify James Halstead, this screen short-lists companies that have strong balance sheets, robust margins and dividends that have defied the pandemic.

This time SharePad returned 22 matches and I sorted the results on year-to-date share-price performance:

(Source: SharePad)

I selected Focusrite because it was among the year’s worst performers, had not already been subject to my SharePad microscope and its operations were not obviously linked to stock-market volatility.

Read my full Focusrite article for SharePad.

Maynard Paton

MOUNTVIEW ESTATES: £11m Special Dividend Accompanies Acceptable H1 2022 Performance And Could Signal New ‘Run Off’ Phase Leading To Estimated Returns Totalling £264 Per Share

25 March 2022
By Maynard Paton

Results summary for Mountview Estates (MTVW):

  • An acceptable H1 performance, albeit profit was suppressed by fewer property sales that in aggregate achieved a relatively low gross margin.
  • Certain property disposals realising a record 65% premium to their 2014 valuation alongside an £11m special dividend do not suggest inherent trading difficulties.
  • Management remarks of “difficult times that may lie ahead” may explain why expenditure on new properties remains low and net debt has been kept at just 4% of the property estate. 
  • The special dividend, low expenditure and modest debt all perhaps signal a new ‘run off’ chapter, whereby the group consistently sells more properties than it buys.   
  • Book value inched to a record £102 per share, although run-off guesstimates suggest total dividends following a complete estate disposal could total £264 per share. I continue to hold.

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ANDREWS SYKES: Better-Than-Expected H1 2021 Witnesses European Sales Rebound 29% As Net Cash Reaches £22m And Potential Dividend Yield Hits 5%

07 March 2022
By Maynard Paton

Results summary for Andrews Sykes (ASY):

  • Following the disappointing finish to FY 2020, a better-than-expected H1 performance with revenue and profit up 7% and 14% respectively.
  • Progress was buoyed by ASY’s European operations, which witnessed sales rebound 29% to set a new divisional H1 record. 
  • A restatement revealed previously undisclosed furlough income had represented 12% of H1 2020 profit.
  • The books remain in good shape, with a robust 22% margin and net funds at a sizeable £22m, although extra pension contributions are still required.
  • A possible P/E of 13.5 and yield of 5% hardly seem expensive for the appealing financials and potential of further European expansion. I continue to hold.

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SYSTEM1: Data Services Reaching 43% Of Revenue Supports Long-Term ‘Platform’ Ambitions Although Q4 Consultancy Warning Emphasises Risk Of Transition Mishaps

02 March 2022
By Maynard Paton

Results summary for System1 (SYS1):

  • An acceptable H1 performance, albeit with profit lower than I had anticipated due to greater costs associated with the transition to Data services.
  • Data services continue to advance, representing 36% of total revenue for H1 and reaching 43% for the subsequent Q3.
  • UK revenue jumping 33% in part through an influx of new Data clients suggests the partnership with ITV is working.
  • A Q4 sales warning relating to old-style Consultancy activities emphasised management’s upbeat ambitions are susceptible to mishaps.
  • Net cash now represents 25% of the market cap, with long-term multi-bagger upside still obtainable if LTIP revenue targets are met and healthy ‘platform’ margins are delivered. I continue to hold. 

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

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23 February 2022
By Maynard Paton

Recent market wobbles have prompted some ‘back to basics’ filtering.

Hence a new screen to identify companies that have strong balance sheets, robust margins and dividends that have defied the pandemic.

The exact filter criteria I applied for this ‘safe haven’ search were:

  • Net borrowings less total leases of no more than 0 (i.e. a net cash position excluding IFRS 16 lease obligations);
  • A trailing 12-month operating margin of 15% or more, and;
  • A minimum five-year record of annual dividend improvements.

I ran the screen the other day and SharePad returned 23 matches:

(Source: SharePad)

I added an extra column to the screening results to sort the 23 on five-year share-price performance.

I selected James Halstead because its shares had improved only 9% since February 2017. Of the three weaker performers, two had already been subject to my SharePad microscope while the third — an obscure Kenyan agricultural business — did not quite fit the ‘safe haven’ approach.

Read my full James Halstead article for SharePad. 

Maynard Paton

TASTY: Re-Opening Closed Restaurants, Rents Cut By 27% And ‘Extremely Encouraging’ Trading Support Hope Of A Recovery Following Pandemic-Disrupted H1 2021

28 January 2022
By Maynard Paton

Results summary for Tasty (TAST):

  • A predictably poor performance due to the pandemic, albeit with revenue up 33% on the even worse H1 2020 following greater takeaway and delivery sales.
  • Favourable changes to both the ‘going concern’ small-print and CVA commentary suggest the risk of failure has diminished.
  • But underlying net cash of £4m does not leave enormous room for error given an estimated underlying cash outflow of £1m for this H1.
  • IFRS 16 total lease obligations remaining at £55m looks odd given annual rents may have been reduced by 27%.
  • A post-results update citing “extremely encouraging” trading plus plans to re-open the remaining closed restaurants provide hope of a recovery. I continue to hold.

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[SharePad] Small-Cap Spotlight Report: CAKE BOX

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21 January 2022
By Maynard Paton

Oh dear. I had expected this article to celebrate a dynamic growth company that had commendably prospered during the pandemic.

I find myself instead relaying some unusual financial reporting after digging deep into a few annual reports.

Read on to discover:

  • An erroneous £2 million entry within the cash flow statement;
  • The inconsistent disclosure of related-party transactions;
  • The delayed reporting of a website breach to the auditor (and customers);
  • “Historic errors” with stock control;
  • The auditor resigning after becoming “concerned about the robustness of the Company’s control and governance frameworks“;
  • The peculiar disclosure of trade payables and receivables, and the level of receivables versus revenue, and;
  • Bookkeeping curiosities such as overdue tax, R&D tax credits and regular revaluations of distribution centres.
(Source: SharePad)

Let’s take a closer look.

Read my full Cake Box article for SharePad.

Maynard Paton

PS: I have provided more Cake Box observations on the Quidisq forum.

M WINKWORTH: Exceptional H1 Sets New £2m Profit High As Record Quarterly Dividend Plus Third Special Payout Underpin ‘Busy’ FY 2022

13 January 2022
By Maynard Paton

Results summary for M Winkworth (WINK):

  • An “extraordinarily active” sales market led to an exceptional six-month performance, with the H1 £2m profit exceeding WINK’s peak annual profit from FY 2014.
  • Subsequent trading updates then lifted FY 2021 expectations and announced a record quarterly dividend alongside the third special payout of the year.
  • Market-share gains versus London rival Foxtons plus very encouraging progress at the company-owned Tooting office underpin the prospect of a “busy” FY 2022. 
  • The accounts remain in good order, with this H1 showing a super 38% margin and net cash and investments supporting close to 20% of the share price.
  • Near-term earnings may well subside if housing activity cools, but WINK’s reliable dividends may limit the downside with a possible 5% income. I continue to hold.

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Q4 2021: Up 24.5% For 2021

01 January 2022
By Maynard Paton

Happy 2022! I hope you profited from last year’s strong market and you continue to find my blog useful.

A summary of my portfolio’s 2021:

  • Total return of +24.5% (Q4: +4.6%)*;
  • 8 holdings recorded a gain while 3 holdings recorded a loss;
  • Returns ranged from up 104%, for System1, to down 20%, for Bioventix;
  • Two shares were topped-up: System1 and M Winkworth, and;
  • No new shares were purchased and no shares were sold.

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

I publish a portfolio review after every quarter (Q1, Q2 and Q3), and this post recaps my October/November/December activity and my 2021 performance.

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My Portfolio: Year In Review 2021

01 January 2022
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 4,609-word post provides a ‘year in review’ of my current holdings. I recap how each business performed during 2021 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 2022 will most likely be caused by the shares I already own rather than any new shares I will buy.

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

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15 December 2021
By Maynard Paton

Shares offering ‘Quality At a Reasonable Price’ have been hard to find during the last few years. But recent market conditions might be presenting a few fresh opportunities.

Specialist fund manager Ashmore could meet some QARP-type criteria. At present this £2 billion mid-cap offers:

  • Impressive financials, including a majestic 66% margin and ‘surplus’ capital of more than £600 million;
  • A reliable dividend history, with the payout never being cut during the banking crash and pandemic, and;
  • A reasonable P/E of 12-13 alongside a dividend yield of 5%-plus.
(Source: SharePad)

Let’s take a closer look.

Read my full Ashmore article for SharePad.

Maynard Paton

FW THORPE: £27m Acquisition Spend Underlines New Expansion Ambitions After Special Dividend Complements 19th Consecutive Annual Payout Increase

14 December 2021
By Maynard Paton

Results summary for FW Thorpe (TFW):

  • A remarkable recovery following a factory fire ensured a satisfactory FY 2021, which included a record H2 and a special payout to complement the 19th consecutive annual dividend lift.
  • Customers seeking “tried and tested” manufactures alongside ongoing demand for SmartScan counterbalanced component shortages, the pandemic and Brexit.
  • £27m spent on new acquisitions has underlined TFW’s expansion ambitions and signals a firm desire to earn greater returns on the group’s £76m cash hoard. 
  • The accounts remains in good shape, although the record 47% gross margin may be short lived if supply difficulties and rising costs continue. 
  • A P/E of 30 feels generous, but might reflect operational reliability, a positive ‘buy and build’ strategy, significant ‘ESG’ attractions and/or potential growth beyond lighting systems. I continue to hold.

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