September: #BOO You September!

Catch up edition to rub my nose in losses;

Transactions; Ramping #TPFG, #CLX, #TATE, #FCAP, #SDI, #RELX,

Updates from: #SUPR, #CLIG, #TPFG, #BNZL, #G4M, #IXI, #GAW, #DUKE, #PHP, #ARC, #SOM, #SPSY, #EMIS, #UPGS, #SDI, #SHED, #FCAP, #AAZ, #FNX, #NRR, #BOO 

I would love to say I am back by popular demand, but actually I am back on zero demand (kind of like the cruise ship shares).

I don't usually spend much time proof reading / editing (about as cursory as my Macro/Market observations) - this time I have not even done the cursory - My apologies in advance.

As I mentioned on my last post, I was vacating my laptop (or at least certain browsers) for a couple of weeks and therefore had a backlog to deal with.

Having dealt with the backlog & no reason to write this other than dopamine, I was lazy.

That said, I thought writing this a couple of weeks after the event would prove to be an interesting exercise, especially in light of the market dramas and a number of transactions I have completed since - lets see if I followed my plan.

Given this is a catch up, I will not be offering my brilliant insights on the market or public service, but I will do a catch up in October Week 1.

Public Service

OCTOBER WEEK 1 - when it is up - hopefully later today

Cursory Market/Macro Observations

OCTOBER WEEK 1 - when it is up - hopefully later today

Portfolio Review - Month

A bad month - don't think there is any hiding from that - BOO You September!!

What is especially depressing is that post BOTB, I crowed about how in spite of the loss, I was 10% YTD - well that has taken a substantial hit - 4.4% YTD 1st October but who is counting, especially now!

I think I have been calling that the market was setting up for a phase of risk off and looks like it hit us in September (as it tends to).

No great kudos to me, I am more often than not, going to tend towards risk off (and given markets usually go up), I will tend towards being wrong!

To demonstrate how wrong I am capable of being, I also talked about how my portfolio tends to underperform in rising markets and outperform in falling markets - works in theory but there is no hiding place here, some of it is noise but a lot of it is results driven - I am not sure I agree with the market assessment in all instances.

To paraphrase someone famous: 

My Portfolio is what happens while I am busy making other plans.

Lessons:

OCTOBER WEEK 1 - when it is up - hopefully later today

Transactions

Sell RELX 

• No good reasons for the sale, but to provide them:
• Jittery about the market & wanted to free up cash to add Bunzl if those jitters were realised (Bunzl & Relx being held in the same account) - reduce number of holdings & Bunzl on the whole is the type of concentration my risk tolerance can handle (more so than RELX).
• I saw Finsbury Growth Trust (held in wife's account) was trading at a 5% discount - LSEG ex holding & a number of companies I'd be interested in buying if 5% cheaper - added to holding in wife's account - Relx being 10% of that fund.
• Didn't appreciate the amount it had re-rated - applying Peter Lynch - a 20% gain on a large cap is pretty good.

Reduce SDI 

• Opportunistic add when the share price fell to 1.50 & became too big for comfort in light of upcoming AGM update.
• A very short & positive AGM Update - decent start to the year & modestly above initial forecasts - full year at least in line.
• Maybe one of the top slices I prove to regret but was right decision for me - think they will beat pre-acquisitions but valuation is there & uncertainty from 2023 onwards.
• HOLD - there could be upside to the 2023 uncertainty - CoVid testing going away completely after 2023 or endemic?

Reduce CLX

• Not really a reduction but moving to SIPP given expected dividend start, second part to be completed.
• Note - since there have been updates & regrets/chasing - more in the coming weeks.

Add TPFG + Results 

• TPFG was on the back of additions my largest holding at the end of September.
• Results I thought were very good if not spectacular (and unlikely to repeat) and the share price reaction was pedestrian to say the least.
• Please take my bullish view with a pinch of salt, but at a share price of £2.70:
• Mortgage Genie acquisition - 500k purchase price - Mortgage advisor - rep of LSL - 950k Revenue, 71k Profit - July 21 - somewhat a trough in profit on 31 July completions  - Matt Stevens continue to lead - founded in 2016 - 10 advisors/17 staff 1m Revenue in 5 years - I think that is impressive
• Grow the financial services business - seems a fair use of the cash - especially with Hunters sales focus
• Revenue up 117% to 11m, LFL 37% on PY to 7m (29% on 2019), MSF up 35 & 23% to 7.3m - 60% of total; PBT 3.1m, ADJ EBITDA 5.2m - 47% Operating Margin!
• Network income / No Properties in line with increase in Revenues - EWE Move - 37 territories is pretty good - Anticipate current profits ahead of full year expectations (what I thought would happen when I last added)
• Slowdown in summer (assume hit EweMove recruitment too, otherwise 230 for 2022 unlikely) but September ramping up
• Rental growth at high street 9%, financial services growth - Sales - higher prices & more sales - very unlikely to repeat - may go down.
• Lettings/MSF should remain resilient and rest of business won't fall of cliff, just less buoyant - FS may offset some slowdown - EWE - easier to recruit in a booming market??
• Started presenting EweMove seaprately - pretty good - there is a lot to like and it could be around 12x earnings - given margins / profitability / growth initiatives
• Quality, growth, reasonable price, seems good management, with healthy dividends -          Cheaper than Belvoir pre-upgrade - refer to progressive dividend policy - suggests the increase is not a special - it is a substantially bigger business - Mgt Presentation: "With dividends, the idea is to go up & not go back" - Vivek's Presentation: Historically Final dividend has been 2x interim, which would suggest 7.6p total 11.4p (vs Forecast 10.6)
• Biggest risk here is the housing market but it is very supported by the government, not slowing down & lettings should be ballpark inflation linked
• Founder/Director selling & Liquidity considerations but even after the pretty sizeable run up, this is not expensive - if you full year the earnings it is 10x, on forcast 13x pre upgrade prob sub 12 post upgrade.
• Not comfortable with liquidity but I think I would be happy for this to be a bigger position, still very reasonable.
• Add to Hold

Add TATE

• One of the reasons I like Tate (other than it's defensive/sleep easy qualities is that there has been decent growth in the solutions business, which has masked a declining commodity business.
• Post announcement of the sale of 50% of the commodities business for EV of 1.2bn, cash proceeds of 900m & return of cash of approx 500m, I put the remaining business on an EV of at 2 - 2.4bn for a remaining business generating EBITDA 270m with a very healthy balance sheet.
• The business is growing double digits (and new products alone is growing at 21% (comparable size to Treatt, slightly smaller but TET growth reported 14%) 
• Previously held in income portfolio only, but given more growth / higher quality going forwards, it is worthy of more than bond proxy.
• Strong portfolio fit - high quality growth with new business - much cheaper than TET - i.e. GARP/QARP , stand alone QARP / Quality income - Ultra defensive & strong portfolio fit in terms of position size / sector 
• New product growing at 21% - higher than TET - and some 80m T/O vs TET at 115m - a lot more cash generative - split business will be higher margin and faster growth - should result in some re-rating
• Fairly sizeable add - almost 2% of portfolio to 3% position - fair now - although could be bigger given defensive business albeit with some execution risk
• Lesson: Don't ignore technicals & there was agitation/impatience in execution (due to level of cash and first day back - there is a mark to market & stamp duty cost to that).

New FCAP

• Following my sale of LSEG, I was looking for something in this space and FCAP had been on my radar but I wasn't able to purchase as it really moved on the back of some excellent results & I expect some bullish commentary in investor forums.
• I know the management team from several lives ago when the Management Buy Out was completed in 2009/10 - it is remarkable what they have achieved since then especially in light of the operational challenges they had at the time (and 2010 wasn't exactly the boom years if I remember correctly) - if Small Cap investing is about backing management teams, this is one of the few I can opine on and I wanted a started before the AGM statement.
• FCAP with their management teams make me think of Moelis & PJT Partners - rainmakers who started their own firm - and when they had boom years, they expanded into other activities, UK examples are less glamorous but Cenkos & Numis have been good long term investments.
• They bought the business from JM Finn in a very shrewd deal near the bottom of the market, got backing from Jon Moulton & count Vin Murria on the share register.
• AGM Update was solid: Guided in July Q1 ahead - tracking ahead of top end of guidance (40-52m) + significant incremental M&A deals that could close in half year, Equity capital markets a little behind prior year H1, Cavendish benefit continues from strong M&A in H2 21 - well ahead of H1 21
• Initial launch of analytics & debt advisory contribution for capital markets business (using boom years to expand the business offering!!)
• No change to thesis - yes peak cycle - but not expensive on "normalised" + bigger business / products - long term compounder?
• Suggesting they think H2 will be weaker than H1 (which it almost certainly will be), given tracking ahead but not raising guidance - no profit - staff costs/poaching?
• ADD on the back of the update - Cavendish upside

Portfolio Risers > 5%

ARC up 6.91%

• ARC not sure about this movement, might be timing because it would be close on 1st September as opposed to 31 August when results caused a drama. 
• Pretty much a non-holding following the recent sale) is very illiquid so perhaps benefitted from some dip buying - Bruce Packard added so maybe positive effect (I tend to agree with him).
• Revenues up 1%, PBT flat - 2 additional sales staff but managed to keep costs flat (travel likely). Lost one client due to changed requirements but managed to sell some add ons & work for existing clients - 93% recurring revenue
• Results as expected, still outstanding profitability at 30% margin, 10% Return on Assets & 70% free cash - R&D 500k expensed
• New product developments - more complete solution - Data permissioning product & ability to deploy on in house systems
• Refer to sales pipeline being strongest ever & new territories with no presence - developed online relationship but hard to travel outside UK & want to do this - however not closing deals - say effect of increased sales will not be fully reflected in results to 2023
• A very good company if it can deliver the growth & not lose clients it is very attractive - Cash/Tax adjusted 14x earnings but lack of growth until 2023 - very clean accounting too.
• Given the tiny holding, needs to be sold outright or added to - doesn't meet the Market Cap requirement but pretty low financial risk - customer concentration (52% from three customers!!)/technology is the main business risk.
• No idea - not the most liquid of stocks & its August.
• M/Cap & Customer concentration prevented it from being larger position but based on results and commentary on pipeline, I am more buy than sell.
• ADD
• P.S. I see that Leon Boros who knows the company & management given size of holding has sold materially.

NRR up 6.15%

• Capital Markets Event & targets well received - Target 10% total accounting return, valuations stabilised (down 3% in Q3 vs 9 & 7%) - repositioning for resilience
• Regeneration/retail parks - starting to get yield compression & volumes increasing, including shopping centres - Debt paydown will reduce finance costs
• Rent collection at 91% Q2 vs 86% Q1, 2 million received in insurance & expect another 2 million - 3% of M/Cap
• Was very tempted to add as it got weaker but didn't - still got the value - nothing to close discount - expect it to happen organically/dividend reinstatement/better balance sheet
• HOLD - No reason to Sell happy with size. 

SOM up 5.15%

• I am not going to go through the detail of these results, but if Carlsberg did interims - because oh my word were they rather spectacular - BOOM SCREED INDEED
• Ultra bullish takes are available from other more talented investors so I thought I would present some of the risks
• Not sure how much the warehouse boom can last - still feel that this is heavily cyclical, albeit with perhaps more structural growth, but must be near peak Boomed Screed volumes
• Then again, they are expanding the facility, although I think that is more international angle and for new products - suggests US is near saturated ex new products
• Patents - 12 year life - seem like they are coming to the end of the useful life - which might increase competition as well - those margins are very healthy for competition to want to look at
• People seem to be getting very bullish with this and how forecasts are conservative - capacity suggests that they will top out at doubling of current year - which would be 48m ADJ EBITDA
• Puts it at 10x full year forecast EBITDA, which is certainly not expensive in current market & capacity around 60m EBITDA (40m GBP = 400m EV vs 280m Current) - but that is on peak
• HOLD - still not comfortable given cyclicality - business maybe less cyclical, but that is still to be proven, not assumed

Portfolio Fallers > 5%

Fallers covered in transactions: SDI -6.61%, TPFG -12.1%

No News: REAT -13.9%, GETB -11.7%, SUP -10.1%, BBOX -9.92%, IGP -9.31%, BATS -6.6%, BMY -8.15%, IHC -9.2%, IGP -9.31%, VLX -6.33%, GSK -6.14%, SRC -5.07%, Fundsmith -5.38%

• All of the above are toward the lower end of the M/Cap spectrum and pretty illiquid, so I am going to put those moves down to Mr Market and some of them have had pretty spectacular runs up.
• The ones that declined on News are more disconcerting.
• One of the market observations I had was that in the index turmoil, Small Caps outperformed One of the observations I had during my hiatus (not sure when) was that US Small Caps were outperfoming large, industrial metals outperforming precious metals, even GBP strength so NRR moving up while SHED, PHP & SUPR
• GSK & BATS are supposedly bond proxies so I may need to rethink that given no new volatility - there is excitement around GSK at the moment though!
• As for Mr Smith - to be honest, it is nice that in a bad month, at least I outperformed Mauritius' best fund manager.

News: BOO -22.3%, GAW -17%, UPGS -15.3%, TPFG -12.1% (ABOVE), BNZL -8.75%, PHP -8.3%, FNX -8.26%, G4M -7.07%, SDI -6.61%, SHED -6.41%

BOO -22.3%

• A lot of coverage available elsewhere, so will provide my thoughts
• Guidance retained at 20-25% - spoke that September recovered on Q2 - Q2 was up "only" 10% - I would suggest revenue forecasts are at risk - a substantial build in inventory (maybe good reasons, but substantial nonetheless)
• Heavily adjusted results & I didn't like reference to two year repeatedly - talk about benefits from transition improving margins, but those costs have already been adjusted out - extra marketing investment (how much of this is more expensive/less effective digital advertising)
• Market is saying that any competitive advantage will be eroded - online retail/marketplace - everyone is doing it, dependence on top influencers who get bid up?
• Mgt focus & capital allocation - trying to take over the world (while having operational difficulties) - would it not make sense to focus on USA / UK (is UK saturated) - slowdown in Q2 vs Q1 is pretty dramatic
• That said, they have invested heavily to build a larger business and increased "TAM" which I think is critical to "100 bagger"
• Long term owner mindset - some companies make it easy, others do not - a lot of signals - eg purchase the property in depressed markets / "investing" in marketing for the longer term / inventory build to help with stock availability but as an external shareholder I am not sure this company does make it feel easy to think like an owner (vs UPGS or TPFG for example)
• Art of Execution would say Sell or ADD - I am not sure the share price reaction was overkill - these results suggest the company is going ex-growth right in the period where they are making big growth investments.
• Not sure I am ready to give up on it on the back of a slow half (or quarter more accurately) but need to see how those margins and growth evolves - which may end up being poor execution as I let it drift and sell on the next warning
• OH - they also published a supplier list.
• HOLD - Short term sell - I think the full year 2021 forecasts are at risk - wishful thinking at best
• PS - Sold in Oct Week 2 (around 1.85)

GAW -17%

• Punished for an in line trading update - sales higher than PY (a very good Q1) but freight costs higher.
• Feel reaction was overdone, although the big part of H1 in PY was Q2 - don't think the forecasts are crazy given that they said they were looking at growth in all regions & channels - lots of pricing power & excellent balance sheet.
• Cash generation this year will not be as per previous years.
• HOLD, Maybe even Add given reaction
• PS - Added Oct Week 2 - largest holding again - December will be fun & likely define my YTD.

UPGS -15.3%

• Announced a partnership with Weight Watchers (or WW now) - can't be a bad thing - if cooking/healthy living is a structural winner from Pandemic / New Normal
• Expect share price is a function of China / Freight - fair enough - I was discomfited by it too.
• PS - Added Oct Week 2 - Overdone in my view - some of the margin improvement is known eg Salter acquisition - Dunelm / Retail results suggest they have been building inventory, should be good for UPGS - guided freight issues until Chinese New Year (most prescient so far) & to that end I think we are at "peak shipping crisis" - famous last words & may well be a difficult year.
• Actually, I would be more worried about retailer destocking next year (but UPGS now have a direct to consumer business).

BNZL -8.75%

• 6% CC revenue growth, two year growth at 5.7% - OK - Op Profit growth at 16% to 360m for half year, Organic growth of 2.5% - In line for full year, base business to offset CoVid, covid higher margin - FY moderate growth on 2019 Revenues, cash conversion 100%
• NA, ROW outperforming Europe/UK - fairly standard reading - Europe & UK had one off CoVid orders, margin hit due to Op leverage - Seems they are able to pass on inflation, which is one of the key reasons I wanted to hold this - pass through business - Yay me!
• Outlook tempered by deflation in smaller CoVid items - i.e the current margin around 7% is a one off - looking closer to historic around 5% I expect in steady state, 45% Return on Operating Capital, 250m free cash flow and 16% return on total invested capital - all good
• Market didn't like results - think the fact that 2022 margins will be reduced - Could be that healthcare benefits are masking what was very tough conditions in other businesses, alternatively there is a lot of recovery still to come.
• Definitely one off benefits in results (hence reaction?) and reflected in the dividend which increased 2% - expect some weakness at which point it might be add - likely my most comfortable coffee can stock even if it doesn't 100 bag!
• HOLD - think this is quality at reasonable price (reasonable in the context of today) - very high on my list of a stock you can hold for the next 20 years & can be a larger holding too - hopefully be opportunity to buy cheaper

BBOX -9.92%, PHP -8.3%, SHED -6.41% & SUPR (NM)

• All four of these are trading at a premium to NAV and I guess some of these closed & rightly so.
• I continue to hold all of them and will retain for the income, which is fairly secure, although I expect premiums to close (hopefully NRR discount will close too).
• PHP talked about a 4.5m acquisition & launch of community center - WAULT accretive, which suggests to me it is not yield accretive - 45m in acquisitions has resulted in 2m increase to rent roll - to be honest those NIYs are better than I anticipated
• BBOX announced a placing at a discount to market price, premium to book value - I think it is telling that this was not made available on - I was very tempted to participate (should have done with hindsight), but I have enough and on principal, I don't like buying things blind (Primary Bid had to accept placing price) - Maybe it is democratising (and beats nothing) but I think that is BS.
• SUPR had quite a few announcements in the week and those with interest in the supermarket sector might want to take a look.
• Placing program at 115p - I am a little concerned about the dividend sustainability - 5% yield on 115p share price versus 4.7% NIY on Book Value of 108p - not sure how much the lag in RPI indexing will offset (3% in CY vs 1.4% for PY)
• 6 supermarkets purchased for 113m (NIY 4.6%) - I thought it was interesting that Interesting ALDI has fixed (2.5%) compound increases - in theory inflation above 2.5% ALDI is a beneficiary, below the big supermarkets.
• Supermarket sales - up 11% on 2019, down 5% on 2020 - 12 weeks to 12 July 2021 - online 13% of sales - Wonder what the online market shares are in comparison to total market share - looking good for Supermarkets results - They love Tesco!!
• Competition from Supermarkets themselves, Tesco buying back & Sainsbury exercising JV buyback
• SUPR HOLD to ADD - 4.7% yield, 90% inflation linked - very sleep easy, ex customer concentration in portfolio - strong consideration for Wife SIPP - part of strategy to start building portion of the target retirement income now pending withdrawals and what not
• SHED - Also 6 acquisitions - investing placing proceeds and drawing debt too - 88m in transactions & 15m in forward funding, NIY 5.4% - forward funding is at 6%, off market transactions 4.5-5.5% (which actually is not bad)
• Much smaller units than the BBOX style - happier holding this than WHR given premiums, although now they are evening out - Don't like premium to book value but seem to be better at managing the yield compression here.
• HOLD - NB admin / reduction in BBOX & maybe more into this with proceeds, or NRR which is more sensible but less comfortable holding (Noted before BBOX placing announcement)
• NO ACTIONS TAKEN OR REQUIRED RE REITS FOR NOW - complacency about premiums may well come & bite you in the posterior

FNX -8.26%

• Again a company I like very much on a metrics basis & indeed the operational investments + I think companies that charge a fee on monetary transactions are a great way to hedge monetary inflation (ex disruption from Bitdoge)
• There is a lot of good stuff in these results but some risks - some items selected below
• Payment volumes up 10%, Revenue 19% to 47.7m & GM up 13% to 11.3m - good sign that tracking ahead of TPV, 25% GM 80% of GM to Adjsuted PBT at 8.3m - will give it as main adjustment is IPO fees, 5m net cash 3% dividend - 7p Adjusted EPS - 23x 8.8m ADJ EBITDA up 14%
• Mobile messaging seems to have far lower growth than payments & managed services - Messaging 10% (GM 25%), Payments 85% (GM 12.5%), Managed 5% (GM 50%) 
• 2 customers more than 10% of revenue (down from 3 in PY) - less concentration than I anticipated but still shows pareto principle 
• Growth in line with expectations in all three segments - 34 new customers signed - 111 active customers (Active £500 GP - vs11m GP), up 13% on year end - Seems odd in context of 100% client retention (unless customers take time to become active / some have become inactive?
• 100% platform uptime, international networks, 100% retention and 99% repeat revenue - +ve start to 22 - confident in increasing growth potential/profitability - entry run rate / new customers / partnership & connectivity
• Mobile campaign manager - source of competitive advantage - benefit from new normal - 30% share of UK phone made payments (impressive) - international growth foundations with multinational clients - customer led (Good!)
• Provide incremental revenues to customers that would otherwise not be converted - not in comp with alternative payments like Credit card / mobile - can see the friction argument - but WhatsApp? - Relations with the carriers becomes critical?
• Land & expand, enable shift from advertising based models - sector focus & customer led (I do like that), sounds like partnership with Match group & gaming technology provider - new markets in mobility (e-scooters) & ticketing - expanding addressable market
• Big expansion in sales team & had some pretty outstanding profitability (in excess of 73% & costs have stayed relatively flat), Under invested pre IPO & shown great figures but actually the cost to service/maintain their edge is in fact a lot higher? 2nd half slower than 1st half - if you believe this was based on media budgets & expected
• Potentially winning some flagship clients from competitors - we have a great opportunity to exceeed expectations - some outstanding profitability, but as above that will likely come down (at least in short term), although commentary suggests they can manage the margin pressure (improve GM with better product mix) - Revenue increased on back of results, EPS less so
• 400k increase in staff costs (13% in staff numbers) from 2.2m to 2.6m - 540k development costs capitalised (amortised over three years) 50% of development spend, amortisation charge less but could be timing of development - Development spend 200k above amortisation & increase 25% nearly - and higher level of total develoment spend - 1.2m+ in current year versus 900k - another sign that metrics were somewhat dressed
• EBITDA not worthwhile - but still healthy PBT at 7.4m on 11.3m - IIRC - shares are not nil cost so should not be overly dilutive - PBT growth at 14% - Even with the extra investment should still be around 6m free cash (this year was 6.5m) and forecast is for 7.2m vs 160m MCAP / EV - Given additional staff costs (doubling sales - maybe equivalent to 1m exceptional IPO costs - 50% increase on PY staff costs
• HOLD - still want to get to know the company - still a recent IPO & there are some questions re how profitable is it really & also competitive threat/positioning but there is an awful lot to like.

G4M -7.07%

• I think the share price suffered from supply chain jitters and read across from the likes of Boohoo and ASOS - the trading information itself was OK and the acquisition, in my view positive - again increasing TAM
• Trading in line with mgt expectations, returned to growth in UK in July/August 2021, Europe lagging - Brexit challenges - New warehouses operational in Q3/4 FY 22 should alleviate, mindful of supply chain / CoVid restrictions
• Acquired AudioVisual distributor & AV.com for 9m - 7xEBITDA (not bad in context of freehold) - roll into G4M platform, take to Europe, build AV.com brand - Increases TAM 400m market in UK + better utilisation of  existing capacity - like it - earnings accretive in 2023 - expect investments in current year
• Exceptional year for AV & G4M - return to growth in July & August in UK is interesting - Q2 PY was 50m (19 - 39m) Q1 PY 21m (19 11m) - flat full year forecast revenue, earnings down but they did say they retained some of the margin benefit.
• Like the company, clear reporting / focused - think there maybe some upside to the earnings forecasts (less so Revenue) - interesting acquistion too
• HOLD, Maybe Add but want to wait on the interim results - see where things are given Europe was nearly 50% of revenue

Updates & Results

One would think I would be finished after all those words, but following reported without too much drama in the share price (albeit they did move around a lot in the month).

IGG, EMIS, SPSY, IXI, CLIG, DUKE, AAZ

If ever there was a reason to reduce the number of holdings!

IGG

• IGG readacross hit 6% from CMC - hit hard on lower trading activity - NB they also talk about retention tracking below 80% - BUCKET SHOP!
• Revenues up 6%, to 221m, ex Tasty trade down 4% - 200m in Q1 vs 214m Q4 21 & 209m Q1 21 - quite the hit in terms of revenue per customer - OTC leveraged is BS comp because of change in presentation
• Strong performance - size & quality of client base - confident in medium term targets - would suggest short term is more at risk
• Active client 287,000, Ex TastyTrade 225,000 - Up from 201,500 but at year end 31 May 2021 it was at 314,000, pre Tasty trade - suggests 30% of customers are no longer active - BAD? - 22000 onboarded which suggests quite a lot of churn - as opposed to historic levels - Pre pandemic was around 15000 per quarter
• Still not comfortable with Add in spite of "cheap" - would likely be a seller in short term if better use for cash / current cash levels - high beta & volatile earnings - unlikely to get high multiple given reg/market exposure
• HOLD - reticent to sell given "perceived cheapness" - If I had to take action, I would sell

EMIS

• Total revenue up 7% to 83.5m from 78m, Recurring up 4% to 65.8m (80% of total) from 63.5m, ADJ Op Profit up 13% to 20m (24% margin) from 17.8m, Reported 16.3m (DOWN from 16.5m) - sales mix led to better margins
• H1 slightly ahead, focus on growth - Integrated Care Systems (interoperability of systems, analytics & digitisation), digital support - now & post CoVid
• EMIS Health, 54.3m (flat) Recurring revenue up 3% - support NHS digital & regions with delviery strategy, GP IT Futures framework/ GP connect
• EMIS Enterprise, 29.3m up 21%, ADJ Op Profit up 28% to 8.4m, reported 6.6m - Outcomes4Health - Vaccination from non clinical settings to GPs/Immunisation database, Community pharmacy - play into NHS primary care strategy & patient discharge management - records transfer from hospital to pharmacy
• Hardware related services down due to pandemic benefit in PY (6.4m from 9.6m), one off in EMIS Enterprise for Vaccine rollout - software up 4%, Others up ~20% (Interface connectivity 12.1m - seems like decent growth in 2nd largest business area, Other (projects) 7.9m, Perpetual license/implementation 6.2m from 3.2m (Vaccine rollout in this)
• Patient Access - digital access for primary care - but healthcare "ecosystem" - Healthcare SuperApp???, enabling community pharmacy booking - 1600 branches 248 customers & evolution of partner program - that is interesting - if EMIS can be the main enterprise system - could become a platform for reselling technology tools that need to integrate
• EMIS Health - had the big development expenditure PY, but not delivering the revenue growth, esp vs Enterprise
• ADJ Presentation - fair enough, they are getting to Op Cash less development spend - wonder if they continue this treatment if capitalised development costs become bigger than amortisation Cash flow - Big receivables build up - timing issue - recevied July + VAT Deferral, if 2m paid for contingent consideration, why is 2m still in current liability?
• So much to like about this business, but valuation is more than fair if not toppy and customer concentration / disruption could be very problematic - may well be a bid target!
• HOLD - given position size, I would rather do something with - but if all things stay same and company gets cheaper, I would be a buyer, therefore not selling current holding 

SPSY

• New customer for materials in K-Cups/Keruig brewers - $500k in materials sales / annum - doubles size of business / 2 customers
• 8m revenues - up 20% - pre-production development contracts, higher volumes from Central Bank customer; (ADJ EBITDA / PBTA / EPS) up 45% to 3.5m, 3.4m, 6.7m - Cash from operations 4.5m, 12.9m Net cash
• Authentication/Security - 7.1m up from 5.8m in PY - CB covert material - CB higher volume seems one off to H2 20 & H1 21, EBITDA 5.8m from 3.4m in H1 2020
• Trubrand - new customer in stationary in addition to existing Tobacco - difficulty in getting to market due to US/China trade/IP tensions, looking European tax stamp & car registrations
• KCUP - new customer (above) - epxect to reach 1m Sales in 2022 - high margin materials sales - no extra staffing - accretive it is said
• Secure transactions/lottery - 920k Revenue, 118k EBITDA (156k on 693k Revenue) - development work on software platform hitting EBITDA - Canada customer open door for more 4 more lotteries
• New - Banknote disinfection product launched, one new customer for Kcup optical materials, sensor contract for Bank, new customer for TruBrand, lottery business Canada contract + US renewal - CEO comment +ve re developments - quite a slow lifecycle - understandable given the secure nature of the bank note side - is disinfection a permanent thing - seems to have added capacity in polymer substrate provision
• In line with expectation - on course for record year, although not a record dividend - if the new areas can grow, this could be a larger business - margins suggest there is genuine, necessary & valued technology ( or Chemistry more accurately
• Growth - short term usual + disinfection, grow Trubrand - several millions of $ & get KCUPS to 1m, Long Term 2024-28 - sensors 42m & Fusion polymer sales - asssuming it gets validated in short term
• Pretty decent increases in deferred revenue - more than revenue - adjustments are actually fairly reasonable & no funnies in balance sheet (albeit working capital is a big chunk)
• Very good business, reasonable valuation - IP / Stable clients / New products/technology - seems a bit on the too good to be true - does the business die - They say 42m 2024-2028 - 10m a year - so doesn't seem like imminent death
• HOLD Uncomfortable hold given the too good feeling, but can't spot anything (obvious at least) & typically results have eased comfort levels - happy with position size given the feeling

IXI

• Contract win, worth $500k over 4 years - Phase 1 trial for Biopharma for Mutiple System Atrophy treatment - provide advanced neuroimaging (MRI / PET / DaT)
• Phase 2 trial - Huntigtons Disease - Trial tracker platform collect/manage/scan images from 10 imaging centres - Provide advanced neuroimaging (structural MRI) - patented LEAP AI driven analysis of scans - 500k revenue over 12 months - 5% boost
• Another contract win with leading Clinical Research Organisation - 750k USD over 2 years Master vendor agreement with CRO is more interesting re increasing sales (and ease thereof)
• I hold because Profitable company with interesting work & gaining momentum on contracts - picks & shovels in a huge healthcare area - lots of dilution but now profitable - Amount of intangible capitalisation has stepped up a lot - Doesn’t fit M/Cap criteria but "exciting" & not that expensive (assuming working capital/intangibles is not a hidden problem)
• HOLD 

CLIG

• AUM 11bn, PY 5bn - doubled in size, Fee income at 52m$ vs 31m PY - Basic EPS 40p, Adj 48p - dividend increased 10% to 22p - PBT 26m - 50% margin near enough!!
• Net Outflows - 500m Gross inflows, 800m Net Outflows. Intl CEF closed (now reopen) - Not enough demand for frontier markets, Opp Value lost largest client - will replace, CEF & REITs 3yr record for growth, closing SanFran office - 11.4bn AUM, up 5% on 31/12/20 - 9% growth in 8 months for Karpus, CLIM strong investment performance
• Mgt fees accruing at 74bps of AUM, fixed costs approximately 27m per year & 25% Proft share, focus on CEF / OV / REITs - standard distribution channels - Flat AUM - 11.4bn$ - at 0.74% - 30m PBT, 24m PAT +30m Cash/Investments on B/Sheet - Why did I bother - they give the table - must say I like the transparency of the reporting - they're accruing fees at 0.73%
• Acquisition - 60m GW/10m DTL - 40m Intangibles 7/10/15 yr amortisation - ~ 12m Cash earnings on 100m price - not bad given the diversification benefits
• Very happy to hold - re-rated somewhat but still cheap in sector & niche provider, comfortable holding - where is the growth - markets won't repeat! 
• The net outflows are problematic but manageable, very healthy business, M/Cap has increased more than size of business but more operating leverage too
• HOLD - Could be add given cash levels

DUKE

• Cash revenues 11m vs 10.2m, PBT 16m, 6m ex FV movements - 2.25p dividend. - Op Cash 8.9m vs 6.2m in PY - 2.1m in expenses of which some 1.1m went to the Executives!!!
• Cash revenue in Q1 2.9m, 24m in new capital deployments and one new royalty partner, 3 post year end, 35m Equity placing to deploy
• Refinancing risk if the cash dries up - lot of volatility in P&L because of FV treatment - seem very confident in their credit underwriting capabilities
• Has shown resilience through 2020 - would have been hit hard - do like the funding model - given retention of control - not expensive - PE looking for 8-12% IRR - provides exposure to private markets / alternative finance
• Agree funding gap for SMEs and opportunity given withdrawal of support - shift to support buy & build plays to demographics - 2x (an unreliable or at least volatile) book value
• Management seem pretty well compensated - should be at 11m cash for 2022 vs 160m M/Cap - 12.5% Return on book value - getting a little expensive - good dividend & growth potential
• HOLD 

AAZ

• Cursory note to say that this is the last time I will cover the stock - it is in the income portfolio and represents less than 1% of reported AUM - I will hold more as an education tool on the sector & a reminder re Circle of Competence with value plays
• Interim results - not great, cost of production going up & average selling price going down, production down slightly - Op Leverage going into reverse - I understand mining is very energy intensive but costs passed on (Gold with no material use is slightly different!)
• On a positive note, Got rid of a mine in Soutley and received three closer to Gedabek area - granted following cessation of hostilities - 300k tonnes of copper - value of 3bn USD - geographic territory closer to existing Ops compared to territory given up - should help with production cost
• Levered income play on gold price was investment thesis - on that basis, I would be a buyer today - I won't because shouldn't have bought in first place - too small to matter - No longer considered a holding
• Cost pressures will likely mean that cost is likely to go up - inflation - if gold price doesn't respond (short term yield rising might pressure it) & production shortfall (guidance retained) - won't be good
• No Action Sale - Write down to Zero - not included in # Holdings - Sell when market conditions more palatable - Find smarter/easier way to get mining/materials exposure for income 

And Finally

I mainly write this blog for my own activity but appreciate those of you that read it.

I was debating whether doing this would be useful - It was to me but given it is dated & doing some back to the future stuff, I am not sure how helpful it will be to others.

So if you do spend the time to read & get this far - Thank you very much.

Adieu