Voyager RNS Log WC 15/04/2018
As ever, although I may get keen about a stock, what I put into print here is purely me sharing my rambling thought process and NOT INVESTMENT ADVICE to either buy or sell a particular stock.
The key for the colouring of text within these notes:
Text in normal black: just my thoughts.
Text in blue italics: direct lifts or copy & paste from the RNS issues by the business.
Text in green: loosely, the investment principles that I feel comfortable with.
Red is a disclaimer in that what I write is NOT investment advice.
I see that early in the week that Tim Martin, the very unique character and chairman of Wetherspoons decided it was time to pull the plug on his companies involvement with social media; good for him I say. I appreciate Tim’s reason were other than my comments that follow but I really feel that the likes of Facebook messaging and telling the local burglar that you are out for the night partying, has a lot to answer for. A couple of months ago in a really fine pub in Rydal Cumbria, a family of four, parents plus two young teenagers and also a rather nice dog, came in for a bar meal. The parents tried to start a sibling inclusive conversation but the two teenagers remained totally glued to their smartphones and the only conversation that came from their lips the entire time they were there was a “yes” when asked if they would like ice cream for dessert. The dog who did not have a clue about smartphones or Facebook was very social: what a world! Where has conversation gone? Is it just in cyberspace?
I quick thought on last weeks benchmark blog: just to be clear, I certainly don’t mean tracking an index or fund but really just my encouragement for private investors to continuously try improve their investing by looking at what the quality boys do and over say 5 years. If they are continually ahead of you and you simply can’t change your habits and importantly assuming you invest to increase your wealth, then think about giving up and asking a successful manager to look after your pot.
On to this week's log:
Monday 16/04/2018: No RNSs relating to Voyager holdings:
Tuesday 17/04/2018: No RNSs relating to Voyager holdings:
Wednesday 18/04/2018: IG Design: IGR: Mkt Cap £275: AIM Market: RNS is about:
Increasing revenue and improved margins driving strong growth
IG Design Group plc, one of the world's leading designers, innovators and manufacturers of gift packaging, greetings, stationery, creative play products and giftware, announces a trading update in relation to the year ended 31 March 2018.
The Group's trading accelerated in the second half of the year with all regions delivering strong revenue growth and increased profits. As a result the Board anticipates a full year of overall progress and financial performance in line with management expectations.
The Company's results for the full year to 31 March 2018 will be announced on 11 June 2018.
- The Group's gross and net margins have increased driven by strong performances across all of the Company's global operations, with the previously flagged cost headwinds having been effectively mitigated
- Net cash ended the financial year positive, after having completed the acquisition of Biscay Greetings in Australia, the disposal of part of the Hirwaun site in the UK and with record levels of capital expenditure invested during the year
- Average leverage during the year is expected to have been below 1.5 x EBITDA (FY17, 2.3x EBITDA)
- The Board remains committed to its progressive dividend policy and is considering increasing the Company's earnings pay-out ratio in future periods, to reflect both the improved financial performance of the Group and the positive outlook of the Directors.
My View: IGR is one of my major holdings as there is just so much I like about the company:
The company is run by competent management who understand their market.
Senior directors have a good level of share ownership.
IGR makes real profits increasing year on year.
The company makes decent returns on capital.
The dividends whilst being a touch mean as the company has invested should appreciate in the future according to management.
The newsflow from IGR continues to be very encouraging.
The table below from SharePad gives a nice summary of some key numbers as we stand and the key ratios which already look interesting will be updates when the finals are published in June.
Taking a look at risk:
Just need to keep an eye on net debt over the coming months.
For those who like the security of a high Stock Rank, IGR comes in at an impressive 85.
All in all, I am happy to retain my holding and may be tempted to but a few more on a share price dip. Having said that, I see this stock as a nice quality steady growth company that will appreciate over time; I doubt it will move like a rocket but that will do nicely for me.
An interesting PI video recorded on Monday this week (PI World offer an excellent service):
Wednesday 18/04/2018: Telford Homes: TEF: Mkt Cap £320m: AIM Market Stock: RNS Trading Update:
TEF tells us that they have had a “Strong performance reflected in circa three percentage point improvement in gross and operating margins”; all sounds rather good to me. Incidentally, the comparative table shows why I rate TEF so highly compared to other more popular building stocks:
My View: whilst this housebuilder has done nothing like the return that my other builder PSN which has kindly given over 100% return, TEF has more than earnt it’s keep in the portfolio yet seems to be somewhat overlooked by the markets despite having a first-rate management in charge. \for those who like Stock Ranks, Telford scores an impressive 89.
Until the cyclical housing downturn kicks in, which it will, of course, one day, I am happy to hold this niche builder who concentrates on the chronic housing shortage in London.
Wednesday 18/04/2018: Bodycote: BOY: Mkt Cap £320m: FTSE 250 Stock: RNS Contract win to supply Rolls-Royce:
Bodycote, the world's largest provider of heat treatment and specialist thermal processing services, announces that it has signed a 15-year contract with Rolls-Royce's Civil Aerospace business. The contract is expected to be worth over GBP160 million in incremental revenues over the 15-year period. Sales will ramp up over the next five years.
My View: yes another one of my exceedingly boring companies but as readers will know, I simply love boring companies. A decent and encouraging contract win to supply Rolls-Royce with over £160m over a 15 year period. Now in terms of turnover, the current BOY turnover is around £690m so that’s a pleasing but not massively significant £10m or so a year but it all helps.
Thursday 09/04/2018: D4t4: Mkt Cap £55m: RNS Press Release:
Essentially the statement is about encouraging progress with Celebrus. The RNS came out at 09:00 and the share price responded immediately adding a further 5%. Not much more to say really but looking rather decent and I look forward to their year-end results.
Friday 20/04/2018: Bonmarche:BON: Mkt Cap £45m: RNS Trading Update For Year Ending 31/06/2018:
The Company is pleased to confirm that, reflecting the good progress achieved during the financial year, the FY18 profit before tax will be in line with the Board's expectations.
Online sales maintained the strong growth seen throughout the financial year, against comparatives that became more difficult in the fourth quarter. Store sales performance was disappointing, reflecting the issues more widely reported in the clothing market.
Whilst total sales for the year therefore declined slightly, the gross margin percentage was resilient. The lower headline gross margin that had been anticipated due to adverse FX movements, was largely mitigated through tight stock control and improvements to the loyalty scheme, which led to lower discounting. There were also significant overhead cost savings, delivered through improved operational efficiency and reduced, but more effective, marketing expenditure.
Helen Connolly, Chief Executive Officer of Bonmarché, said:
"As anticipated, trading conditions in the final quarter of our financial year remained challenging and, against this backdrop, I am pleased that we have delivered an increase in the FY18 profit before tax compared to last year.
"Whilst we expect the market to remain difficult, our focus will be on continuing to improve our proposition to customers through a number of self-help initiatives, which we expect to drive further progress for the business during the new financial year.
My View: At BON and in common with a lot of other retailers, the high street continues to experience fairly tough times. However, I think that Helen Connolly is doing a good job at BON since her arrival. The interesting part is the continuous percentage increase in LFL sales of the online offering yet against this we have to balance that online was accounting for about 10% of total turnover at the half-year report; if on-line contributed say 30% of total sales then I would feel much more positive about the stock. This is in truth only a very small position for me and bought in May last year as a recovery situation and it may well be one that I have got wrong even though it’s just about cost neutral with that generous 8% yield. Probably time to move on with this one; you can’t win them all!
Other Thoughts On Previously Held Stock:
I thought I would offer a few comments on stocks where I sold once I saw bad news breaking, each of these companies has released an RNS during this week:
Galliford Try: GFRD: Not really an RNS but those mean chaps Peel Hunt has reduced their price target for Galliford Try down to 1165p even by my standards that’s a touch mean and over a £ less than I got in my sale following the RNS on 15/01/2018 informing up about their Carillion liability. Now whilst GFRD does not tick the boxes as a buy for me at moment, I rather think that Peel Hunt are a touch pessimistic long term. A decent company in their in my opinion but maybe I am being overly sentimental having had a long association with them back to the time they were under £3. I reckon that in the medium term GFRD will be fine: I do not currently hold a position either long or short in GFRD but do feel slightly tempted as I can see a 20% total return on these over the next 12 months.
SPRP: A couple of years back I sold my holding in SPRP on the morning of their trading statement on 18/04/2016 relating to battery issues and have never been tempted back since. The RNS of 19/04/2018 “The Company continues to take legal advice, and is in communication with BRK, with regard to the Termination for Breach Notice, the allegations made by BRK and its position. The Company disputes the allegations made by BRK. A further announcement will be made in due course.
The gross book value of the disputed stock of unsold BRK products was GBP4.3m as at 31 March 2018. Whilst discussions with BRK continue, the Company is unable to confirm the expected date for release of its audited final results for the year ended 31 December 2017. A further announcement will be made in due course.
The Company announces that in late January 2018, it entered into a committed 3 year revolving credit facility with HSBC Bank plc for GBP7.0 million to fund the Company's working capital. On 29 March 2018, the Company drew down GBP3.0 million of this facility”.
Apart from the destruction of investors wealth, this situation as SPRP is really looking a bit of a muddy mess with simply insufficient clarity as to what is really going on. In addition, sadly, I simply don’t think that the management are strategically that switched on; simple as that. In order to invest in a business, I have to have confidence in the management and SPRP don’t really give me that confidence; I don’t think they cook the books but as I say, they just strike me as strategically naive and rather accident prone. However, having said that, if I were an investor, I would dig into the detail a touch in order to reassure myself that the high Capex/D&A ratio is sound and not a cause for concern; as I am not an investor in SPRP, I can’t be bothered to dig. Just to add to the lack of confidence, the group finance director resigned with immediate effect in March; see the 5th March RNS: it always worries me when I see the poor old CFO or CEO for that matter, leaving with immediate effect; walking the plank to be fed to the sharks! Also they have just drawn down on a £3m debt facility with the banks which I can’t quite understand as the most recent accounts claim to have something like £10m cash available on the books!! They really need to explain to shareholders the cash position in my opinion.
With SPRP, it may all be perfectly innocent and part of the grand strategic plan & will no doubt be made a touch clearer in a future RNS. Incidentally investors will have a chance to put a few relevant questions to SPRP at Mellor next week. I do not hold a position either long or short in SPRP.
Gattaca: GATC: If you forgive the expression, “when you smell a rat, get out” and sadly this has been the case for the perennial destroyer of investors capital and again I see it as a case of poor strategic management. You may remember that they were originally under the sensible name of Matchtech and whilst under that name their share price rose from 240p in early 2013 to 640p a mere eighteen months later. Then it seems that management simply lost it sadly at a time when others in their sector continued to prosper. They probably paid vast sums to some image consultants to advise them in making that dreadful name change to Gattaca; just what the heck does that name mean? I sold my shares back in 2016 when I just simply no longer felt I had confidence in the management of GATC; since that time the share price has constantly dwindled down to Thursday mornings 145p. As I always say, if in doubt, get out. Note: investors had plenty of red flags including the immediate resignation of the CEO in early February and a sale at that time would have at least protected an investors capital a touch more than today's share price. I do not hold a position either long or short in GATC.
Finally, an RNS from another incredibly boring business but this time one I sold back in early 2017 when the share price just about tripled my original investment yet there was still a little more to come but that’s investing! The company in question is Trifast: TRI and again a very well managed business but at the time, I felt that its valuation was becoming maybe a bit stretched yet since I sold it has put on another 20%, so what do I know? On Thursday they released an encouraging RNS “slightly ahead of expectations”. TRI still ticks a lot of boxes for me as it is a class act but I doubt I would return unless that really did something about that measly dividend of 1.4%.
Also this week, I have been busy topping up Somero (SOM), buying back into a previous “profits taken holding” BOO and actually purchasing a share from the past that at one time did very well for me, Restaurant Group (RTN) plus taking a spread bet in AA; you may remember I wrote about the sad demise of AA a couple of months ago.
So why am I buying into these two losers you may well ask (in fact, I may well be asking myself that question in a few months time, plenty of time to get egg on my face).
In the case of RTN, since the finals on 07/3/18 the CEO and CFO have been buying very significant numbers of shares; £170k worth between them, the still generous dividend looks to be covered by FCF although this could be cut should they need more capital (might be a sensible move). Finally, the chart looked rather compelling and I bought in on Monday:
In the case of the AA, I opened a spread bet on Monday: again really significant CEO & CFO purchases of shares in recent days again at a combined value of £170k. Once again the chart was looking rather compelling:
Whats On the horizon next week:
Results: AIR, ABDP & BOO (I have just taken a modest position in BOO after the rather the >40% fall in share price over the last 6 months: will I regret it?).
AGMs with TU’s from PSN & TW.
Ex-Dividend: LGEN & PMP
This week I have been just a bit to busy enjoying the nice weather and revamping a few items in the garden; so, sadly no walking in the lakes. Instead, I will head for Cumbria, Carlisle, leaving home about 5:00 am on Saturday morning to catch the 06:40 direct service to Carlisle. A win for the Hatters will see us back in League 1 but in truth, we only need two points from the remaining three games and that’s IF the other hopefuls each win their final three games: I reckon we are nearly there!
Have a great weekend and enjoy our summer which usually lasts for about five days!
Happy investing; catch you all next week